Step 18 To Selling Your Home: The Appraisal
If the buyer is using a mortgage to buy your home then the lender will require that an appraisal be conducted.
An appraisal is a valuation by a 3rd party of your home and is a requirement for lenders. Every lender has slightly different requirements for approving a loan. These requirements will vary depending on the type of loan being offered and are often very dependent on the buyer's current financial status and financial history. The value of the property is another major element that goes into the lender's decision. In the unlikely event that a buyer stops making payments and the lender has to foreclose on the property, that lender wants to be sure that the value of the property is high enough that the lender could sell the property and get its money back. Before lending a buyer the money to purchase the property, the mortgage lender will almost certainly do an appraisal to make sure the house meets the lender's standards for the loan. After appraising the property the lender will decide the maximum amount of money that may be borrowed.
Who orders the appraisal? The buyer’s mortgage lender orders the appraisal, but the buyer pays for it.
When does the appraisal occur? Usually during week day hours and within 1-3 weeks of going under contract.
Do I need to attend the appraisal? No, you will not attend the appraisal. In some cases, I will meet the appraiser at your home and walk him/her through the property. I’ll go over the comps and state our case as to why we think the purchase price is justified.
How long does the appraisal take? Usually about 30 minutes.
How long until we know if the property appraised for the purchase price? Usually a week after the appraisal appointment. Once the report is written, the buyer’s mortgage lender forwards it to the buyer to let the buyer know whether the property appraised at the purchase price, below the purchase price, or above the purchase price.
If the property appraised at the purchase price, nothing further needs to be done and the closing process will proceed forward as planned. If the property appraised for less than the purchase price, we have a problem. That means the bank will only give the buyer a loan for the appraised value. In this case, the buyer will often come back to us and ask to renegotiate the purchase price down to the appraisal price. If we say no then the buyer has to come up with cash at closing for the difference between the appraisal price and the purchase price and many buyers can’t or won’t want to do that. For instance, if the purchase price is $500K, but the appraisal only came in at $475K and we will only agree to lower the price to $480K then the buyer has to decide if he or she is going to bring an extra $5K on top of the down payment and closing costs to closing or walk away from the deal. If the buyer walks away, his or her earnest money is usually refunded in the case of a low appraisal.
