What Is a DC Home Appraisal?
A DC home appraisal is a professional property valuation performed by a licensed appraiser, usually ordered by a lending institution to establish collateral value. Appraisals apply to many residential property types, including detached and attached single-family homes, townhouses, cooperatives and condominiums. Common reasons for an appraisal include new mortgage loans, home refinance loans, home seller valuations and tax assessment valuations.
How Do DC Appraisers Determine Value?
Washington DC home appraisers use a number of approved methods of valuing real property, some of which are:
- Market Research, including price per square foot during the previous 3-6 month period;
- Sold-to-list price ratio for the same time period;
- Market activity within a one mile radius for the same period;
- Property comparison within that same radius and time period for similar dwellings, including age, condition, upgrades and additions and lot size;
- Some lenders work with appraisal companies that utilize automated property valuation systems in addition to human field appraisers.
How does a DC home appraisal impact your offer?
Offer terms are as important as the price offered for the home in the Washington DC real estate market. Agents balance terms and price to create the strongest possible offer package. Terms include escrow period, earnest money deposit, form of payment (cash, mortgage loan, assumption, etc.), special accommodations such as seller rent-backs, seller home-to-purchase contingencies, buyer payment of special assessments or seller closing costs, etc., and contingencies such as inspections, financing, and appraisal.
When DC home buyers are financing a purchase, they often feel the need to include a financing contingency. This assures the buyer that if the loan is denied, he or she will have their earnest money deposit returned in full. Adding a separate appraisal contingency assures the buyer of the return of their full earnest money deposit if the appraisal value comes back lower than the home purchase price if the buyer and seller can’t agree to alternate terms.
An appraisal contingency is one of the most important considerations for sellers evaluating offers, especially in multiple offer situations. While the buyer who includes this contingency may make a higher purchase price or escalated offer, sellers know that the appraisal may come back below value, forcing them to negotiate the price down or walk away from the deal. That’s quite a gamble since taking a home off-market for one to three weeks to await appraisal results, then re-marketing it means they not only lost their original pool of eager buyers, but their property has been somewhat stigmatized by the fallout of the contract and increased days on market.
Does the District of Columbia Financing Contingency Provide for Low Appraisals?
The 2017 GCAAR (Greater Capital Area Association of Realtors) contract form provides for the following conditions under the financing contingency clause and also shown below is the District of Columbia Appraisal Notice & Addendum to be added to the Addendum of Clauses in the event of an appraisal contingency: