The home appraisal is one of the most consequential steps in any real estate transaction involving financing. In Silicon Valley, where sale prices frequently exceed the list price by significant margins, appraisals take on even greater importance. A low appraisal can derail a deal, while a well-supported valuation keeps the transaction on track.
What Is a Home Appraisal?
An appraisal is an independent assessment of a property's market value, ordered by the buyer's lender. The appraiser, a licensed professional, visits the property, measures square footage, evaluates condition, and compares the home to recent comparable sales in the area. The resulting report determines the maximum amount the lender will finance.
On the Peninsula, appraisals are particularly challenging because of rapid price appreciation and the prevalence of above-asking sales. An appraiser may have difficulty finding comparable sales that support a contract price that is 15 percent above the most recent comp.
How to Prepare Your Home
While you cannot control the appraisal outcome, you can influence it through preparation:
- Present the home well. A clean, well-maintained home creates a positive impression. Appraisers are human, and condition matters in their assessment.
- Document improvements. Provide a list of all upgrades with dates, costs, and permits. A new roof, updated kitchen, or seismic retrofit in an older Burlingame home all add measurable value.
- Prepare a comp package. I always prepare a curated set of comparable sales for the appraiser, highlighting recent closings that support the contract price. This is especially important in neighborhoods like Emerald Hills or Devonshire in San Carlos where sales volume is limited.
When Appraisals Come in Low
In a competitive Peninsula market, low appraisals happen. When they do, there are several options:
- Request a reconsideration of value. If the appraiser used inappropriate comparables or missed key features, your agent can submit additional data and request a revised valuation.
- Buyer covers the gap. Many Silicon Valley buyers, particularly those with significant liquid assets, are willing to bring additional cash to cover the difference between the appraised value and the contract price. This is why appraisal gap guarantees are so valuable in offers.
- Renegotiate the price. In some cases, the buyer and seller agree to meet in the middle, adjusting the contract price to a figure both parties can accept.
- Order a second appraisal. Some lenders allow a second appraisal if the first is contested. This adds time but can resolve the issue.
Cash Offers and Appraisals
One significant advantage of cash offers in Silicon Valley is that they eliminate the appraisal contingency entirely. The buyer is not relying on a lender, so no appraisal is required. This is one reason cash offers command a premium in competitive situations, even when their price is slightly lower than a financed offer.
Understanding the appraisal process and preparing for it proactively is part of a successful sale strategy. If you have questions about how appraisals may affect your transaction, I am happy to discuss your specific situation.