Last week I outlined a “lose lose” scenario where a property did not appraise for the contracted purchase price. In this weeks article I wanted to outline a few potential steps that you can take as a buyer or seller to help avoid this potential problem.

All of the advice that is outline below really boils down to this: be proactive.

For a seller: Make sure you choose an agent whom you feel is trust worthy, knowledgeable and who has provided you with a solid market analysis. You should ask for and review with scrutiny any and all of the comparable properties in which they are basing their price on. Do some of you own homework. Check your local town office for a list of all the recently sold properties. Many towns have these transfers’ compiled in a book. If you notice a recently sold property that seems comparable ask your agent why that property was no considered in your homes market analysis. It may not have been included for good reason (example; it was completely remodeled inside or it was totally gutted inside). For sale by owner properties most likely will not be listed in a real estate professional’s market analysis, but depending on how an appraiser gets their information these transfers could ultimately affect your properties value, so take them into consideration.  Also be conscious of the sold dates for any and all sold properties. Appraisers are generally required to only look at the most recent sales data when determining a value for your property: by most recent I mean six months or less and more commonly three months or less. If you are extra cautious hire an appraiser to perform a true appraisal on your home before you list. If you do get an appraisal on your property before you list remember that this appraisal will only stay valid for a short time. As the market changes and other comparable properties close the appraised value may change. Stay current with the changing market. Make sure your agent keeps you posted of comparable sold properties that could effect your homes value. If and when you get an offer and negotiate a sales price re-examine those closed homes to help determine if you believe your properties agreed sales value will hold up to a current appraisal.

As a buyer you can follow the same basic steps. Ask for data and do research on comparable sold homes. Make sure to stay current with the changes in the market. If you are concerned about a potential appraisal problem ask you lender to contract for an appraisal before you incur other costs such as the home inspection.