Apartment at The Corinthian (Compass)
Whether you’re buying a home with a loan or refinancing an existing mortgage, your lender will likely want your property appraised. The reason is simple: Your home is the bank’s collateral and in order to protect their interest, they need to carefully evaluate the value of your property. While this may sound like a relatively straightforward process, knowing why, when, and how to get an appraisal is more complex than you might expect, especially in New York City.
Everything from the floor level to the quality and amount of natural light to the apartment’s finishes can affect its value. But such visible features aren’t the only thing appraisers are looking at. In co-operative buildings, appraisers are also scrutinizing less visible variables, including your building’s financials and maintenance records. If there is any chance that your building may soon need costly façade work that could result in a high assessment, for example, the value of your unit may be negatively impacted. As a result, it is important to know why, when, and how to get a fair apartment appraisal.
Everything from the floor level to the quality and amount of natural light to the apartment’s finishes can affect its value. But such visible features aren’t the only thing appraisers are looking at. In co-operative buildings, appraisers are also scrutinizing less visible variables, including your building’s financials and maintenance records. If there is any chance that your building may soon need costly façade work that could result in a high assessment, for example, the value of your unit may be negatively impacted. As a result, it is important to know why, when, and how to get a fair apartment appraisal.
Why and When to Get An Appraisal
There are essentially only two reasons one ever needs an apartment appraisal: The first reason concerns financing and the second reason concerns taxes.
To begin, if you’re buying a home, you’ll likely need to have an appraisal completed before you can finalize your mortgage. If you want to refinance, you’ll likely be asked to have the property reappraised. Likewise, if you’re seeking a home equity loan (i.e., borrowing against your home’s equity to carry out a capital improvement project), you’ll generally be expected to undergo a home appraisal. Finally, while less common, lenders may require an appraisal of your home before approving other types of loans (e.g. a business loan), but only if you’re being asked to use your home as a form of collateral.
To begin, if you’re buying a home, you’ll likely need to have an appraisal completed before you can finalize your mortgage. If you want to refinance, you’ll likely be asked to have the property reappraised. Likewise, if you’re seeking a home equity loan (i.e., borrowing against your home’s equity to carry out a capital improvement project), you’ll generally be expected to undergo a home appraisal. Finally, while less common, lenders may require an appraisal of your home before approving other types of loans (e.g. a business loan), but only if you’re being asked to use your home as a form of collateral.
The second common reason home appraisals are carried out is as part of a tax assessment appeal. In actual fact, a property appraisal is only one small step you’ll need to undertake to appeal (for a complete description of the appeal process, consult the guidelines posted on the NYC Department of Finance’s website). However, if you do feel that your home has been slapped with an unfair tax assessment, getting an outside appraisal may prove important, but don’t get your hopes up. New York City’s property tax assessment system is riddled with problems and not all appeals are successful.
How to Find An Appraiser
First, it is important to bear in mind that depending on the lender, you might not be able to hire an appraiser at all. Many lenders prefer to hire their own appraisers to ensure properties aren’t overvalued. If the onus is on you to hire an appraiser, focus on hiring the most qualified appraiser for your specific property—ideally, this is someone who knows your neighborhood and even already knows your building. To begin, ask your current neighbors or an agent or broker who has substantial experience selling units in your building for suggestions.
Second, ensure your appraiser is a licensed appraiser in New York State. Licensed appraisers have carried out relevant education, passed a written examination, and completed anywhere from 2,000 to over 3,000 hours of experience in not less than 24 to 30 months. The highest ranking appraisers are State Certified General Appraisers—they must have at least 3,000 hours of experience in a period of not less than 30 months. If you have any concerns about your appraiser, New York State also publishes a list of appraisers currently facing disciplinary action.
Finally, if you’re a buyer, avoid seller-paid appraisals. It may be tempting since everyone wants to save money, but seller-paid appraisals often better serve sellers than buyers. Also, if the seller’s appraiser pushes the value of the unit up too high, your own lender may back out the of the deal.
How to Prepare for an Appraisal
During an apartment appraisal, you can’t really conceal the basic facts. If your apartment is only 565 square feet and not 850 square feet, it will become apparent. Likewise, if you’re one block into East Harlem and not technically on the Upper East Side, the appraiser will certainly take note of this small difference. Finally, if your co-op board’s financials are a mess, any good appraiser will find out. But there are few things you can do to prepare for an appraisal, and these steps can significantly impact your home’s appraised value.
First, appraisers will be assessing your property’s current condition. Moldy bathroom walls with cracked tiles, loose floorboards, and peeling paint are going to give the wrong impression. Before an appraiser visits, try to address at least basic repairs throughout your home. Second, draw attention to any improvement you’ve completed since moving into your home. If you’ve done a bathroom and kitchen renovation, be certain to point this out. The same holds true for any other costly additions, including built-ins. Finally, on the day of the visit, ensure your home is clean and well-staged—you won’t get extra points for cleanliness, but this will make it easier for your home’s best features to shine through.
What to Do If You Receive an Unfair Appraisal
In an ideal world, home appraisals would be an entirely fair and objective science, but in many respects, home appraisal is more of an art than a science. As a result, similar apartments just a few blocks from each other often end up with drastically different appraisals. Additionally, a number of Black homeowners have found that their homes are consistently appraised for less than those of their white neighbors.
If you feel your home has been unfairly appraised, start by getting a copy of the appraisal report and start looking for potential errors. In some cases, a simple clerical error is to blame (e.g., the square footage of your unit was recorded incorrectly), and if that’s the case, the fix can be quite simple. If there are no obvious errors, do your own market research and compare your appraisal to comparable properties on your block or at least in your neighborhood.
Additionally, the Fair Housing Act of 1968 prohibits discrimination based on race, religion, gender, national origin, and handicap and family status; if you suspect this to be the case, you can file a complaint with the HUD Office of Fair Housing and Equal Opportunity. Members of Congress have called on the Federal Financial Institutions Examination Council to make changes, and a congressional bill seeks to root out discrimination in the appraisal industry, but it has not yet passed the House.
If worse comes to worse, you may need to pay for a second appraisal. However, depending on the situation, this can also be difficult. Your best bet is to start with a licensed appraiser with experience working in your specific neighborhood or building—someone you can trust to give you a fair appraisal.
Additionally, the Fair Housing Act of 1968 prohibits discrimination based on race, religion, gender, national origin, and handicap and family status; if you suspect this to be the case, you can file a complaint with the HUD Office of Fair Housing and Equal Opportunity. Members of Congress have called on the Federal Financial Institutions Examination Council to make changes, and a congressional bill seeks to root out discrimination in the appraisal industry, but it has not yet passed the House.
If worse comes to worse, you may need to pay for a second appraisal. However, depending on the situation, this can also be difficult. Your best bet is to start with a licensed appraiser with experience working in your specific neighborhood or building—someone you can trust to give you a fair appraisal.
Contributing Writer
Cait Etherington
Cait Etherington has over twenty years of experience working as a journalist and communications consultant. Her articles and reviews have been published in newspapers and magazines across the United States and internationally. An experienced financial writer, Cait is committed to exposing the human side of stories about contemporary business, banking and workplace relations. She also enjoys writing about trends, lifestyles and real estate in New York City where she lives with her family in a cozy apartment on the twentieth floor of a Manhattan high rise.
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