A FAMILY-0WNED PUBLICATION SERVING THE AUSTIN METRO AREA AND SURROUNDING CITIES VISIT US ONLINE AT REALTYLINE.US
VOLUME 27, ISSUE 5 | SEPTEMBER 2022
Written by RIKI MARKOWITZ / Contributing Writer
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Understanding The Appraisal Process Agents spend as much time (or more, depending on the client) answering questions as they do on paperwork, marketing and showing properties. Some of the most common questions that REALTORS field include how long it takes to buy a home, queries about fees and commissions, and credit score questions — whether it’s high enough and, if not, how to improve it before applying for a loan. Most agents are pretty quick to respond to these questions because, in part, they’re so ubiquitous. But there’s one area that does tend to stump many residential real estate professionals, and that’s how the appraisal process works. Steve Kahane, president of the Association of Texas Appraisers, says he can’t stress enough how important it is for agents to understand lenders’ and clients’ role in the appraisal process. It could be the difference between a buyer getting the home of their dreams or that dream home slipping through a client’s fingers at the last minute. Kahane, an appraiser in Houston for several decades, recently looked at classes approved by the National Association of REALTORS. He recalls that only two mentioned anything about how to value a home. It’s been much longer than 10 years since the real estate market in Austin-Round Rock has been firmly in the grips of a supply-and-demand paradigm: Demand has been extremely high and supply has been painfully low. As a result, since the early
2000s, prices have been on an upward trajectory. And that makes understanding the appraisal process even more challenging. Too many buyers conflate demand with value and it jeopardizes their chances of closing, even after they’re in contract.
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When agents can explain how the appraisal process works early on in the negotiating process, fewer deals are likely to fall through. It also means agents can help clients adjust their expectations and stay focused on properties they’ll be able to afford rather than those they believe are in their price range. The first thing to understand is that for buyers who are applying for third-party financing (not including FHA or VA loans), an appraisal is not an option. All lenders require one. That can be a point of contention for some clients, especially those in Central Texas who seem to be emotionally committed to pay any price for a house, no matter how high. According to Realtor.com, “Your home is [the bank’s] collateral, and if you can’t pay your mortgage, the [lender] wants to make sure they can get back as much of their money as possible.” It’s the appraiser’s job to tell the bank what their risk is. “Risk is always proportional to the rate of return,” says Kahane. “So if it’s a higher risk mortgage, the lender may want the buyer to put more money down or pay a higher interest rate.”
[Appraisal continues on page 6]
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