04/29/2022
What is an appraisal? How does it impact your home buying/selling process?
Appraisals are an integral part of a home transaction. When a seller and buyer go into a contract, the buyers loan officer will order an appraiser to come and value the home. Remember that a bank will not lend you more money than what the house is worth.
Based off of that appraisal, you will get a report stating the value of the home. Here is all of what it could say.
1. The value came in at contract price. Meaning that you can go forward to close
2. The value came in higher than contract price. Meaning that you can continue to close, and you have some equity in your home!
3. The appraisal comes in low. Meaning that the bank doesn’t think the home is worth what you were going to purchase it for.
When a low appraisal happens, the buyer has to give the seller official notice that the appraisal came in low.
If the buyer has a 22AD, then this would automatically trigger their additional down payment that they committed to.
From there, the seller has a few options they can utilize.
1. Ask for reconsideration of value or re-appraisal, this could take a few days to a week for this to happen and could jeopardize your close date.
2. The seller could agree to reduce the purchase price to the appraised value, or to a price that was worked out between the buyer and seller.
3. The seller could reject the low appraisal, signaling that they do not want to negotiate.
If the seller doesn’t want to negotiate, the buyer has two options. They can terminate the contract and get their earnest money back, or they can waive their financing contingency.
If you have any questions about the appraisal process, I’d love to have that conversation with you!
