What is an appraisal? An expert opinion of a certified, state-licensed professional who determines the value of a piece of property.
Who pays for it? The buyer. The cost is usually between $400-$500
Who orders the appraisal? The buyers lender. The appraisal is typically ordered once the buyers inspections are complete and any repairs have been negotiated.
What do appraisers do? The appraiser will evaluate the condition of the home and determine any upgrades and improvements. The appraiser will then compare your home to similar homes in the area similar in size, style and age. Appraisers have a checklist that measures real values in a property, as well as lowering or raising the property price based on the buyer’s offer and on the condition of the property for sale. A home appraisal protects the bank from getting stuck with property that is worth less than they’ve invested. It also protects the buyer from paying too much for a house.
What happens if the appraised value comes in lower then the purchase price? Now you learn that your dream home is valued at $279,000 — a full $21,000 lower than the negotiated purchase price! Your lender won’t loan more than the appraisal. So what do you do? Before throwing in the towel, take a good look at the appraisal and the comparable homes used. Were they the most similar homes, did the appraiser value the differences between the properties fairly? Are there factors that the homeowner could correct, such as repairs or maintenance? If that’s the case, the appraiser may be willing to take a second look and adjust the appraisal accordingly. You always have the option to order a second appraisal if the appraisal is not an FHA appraisal. This may be a good idea if the first appraiser is inexperienced or unfamiliar with the area. If that does not work, the seller may be willing to lower the purchase price to the appraised value or the buyer may be willing to increase their cash down payment. It is possible that both buyer and seller can negotiate compromises that will satisfy the lender. If, the negotiations fall through and the appraisal is still too far below what the bank is willing to finance, then there’s no choice but to cancel the transaction. In a standard purchase contract, it states your offer for the property contains a loan contingency. This is a statement that allows the buyer to cancel the contract and receive the earnest deposit back in full if the buyer can’t qualify to buy the property at the agreed terms.
What happens if the appraisal comes in higher then the purchase price? If this happens, then the buyer is gaining instant equity. The contract purchase price still stands.
A home appraisal is more than just another cost added to the buyer’s bottom line. It’s a protection for buyer the buyer and the seller involved in the home buying transaction.
The Laurel Nielson Team offers a FREE personal, in-depth home valuation. This is similar to an appraisal. Find out what your home is worth! Call today 480-229-5861