Today I am going to answer some commonly asked questions about an important part of the real estate process: the appraisal.
An appraisal can make or break a real estate transaction. Oftentimes, it is the one thing you are waiting on to close.
What is an Appraisal?
An appraisal is a valuation or estimate of worth for the property you want to buy or sell. The appraisal is completed by state-licensed or certified appraisers. The key thing to remember is Realtors are not appraisers. Realtors can give you an idea of what an appraiser might say through a comparable market analysis or CMA. The bank will make its lending decision on an appraisal from a licensed appraiser.
Why are Appraisals so Important?
Appraisals are important because a bank isn’t going to give you a home loan without one. The bank is using the house as collateral for your home loan. If you were to default and stop making your payments and the house goes into foreclosure, the bank needs to know they can sell for the same value as the loan they are giving. The appraisal helps them decide this.
Who do the appraiser work for?
The lender. The appraiser is the objective third party for the lender for the loan. They do not have a financial stake in the outcome of the appraisal.
Who pays for the appraisal?
The person getting the loan – the buyer. It is part of closing costs.
Can I see the appraisal?
If you are the borrower, you will get a copy of the appraisal report. If you are the seller, you can ask the buyer for a copy. Be prepared most buyers do not share the appraisal with the seller unless there is a problem. A buyer may fear that the seller will break off the closing if the property appraises for more than the purchase price.
What happens if the appraisal comes in for less than the purchase price?
You can choose to:
– Not move forward with the closing
– You can ask your agent to contact the seller and renegotiate the price
– You can pay the difference between the purchase price and the appraised price
A bank will not lend you more than the appraised value of the home.
Since the appraisal is so important, how can you ensure a property appraises for the right amount?
If you are a home seller, you can hire an appraiser to give you a value before putting it on the market. You can then put the property on the market based on the appraised price.
To alleviate this fear, a good Realtor usually the listing agent will meet the appraiser at the property to prepare the property beforehand (turn on lights, open blinds, etc). The Realtor can then be available to answer questions or offer a list of comparables if the appraiser asks. The appraiser doesn’t have to use anything the Realtor gives them but it is still nice to try.
Even if after all of this the appraisal still comes in low, you can dispute the appraisal. Appraisers can be wrong.
I hope that now you have a better understanding of what appraisals. It was one of the areas I did not understand when I bought my first house. If you are looking to buy or sell real estate and don’t have a Realtor, feel free to message me. I can offer you a recommendation for any city in the US especially in Florida. Thanks for watching!
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