If the buyer is using a mortgage to buy your home then the lender will require that an appraisal be conducted. So what is an appraisal?
A property appraisal is an estimate of a property’s value. Property value is based on such factors as location, amenities, structural condition and recent sales of similar local properties. The appraiser, who is a 3rd party contractor, will do a walk-through of the property, noting anything that can alter the home’s value. For example, if the house has a swimming pool but swimming pools aren’t popular in the area, it might not add much value to the property—the pool might even detract from it.
The appraiser will sketch and take photos of the property layout and will look for any safety code violations.
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.
Do I need to attend the appraisal? No, you will not attend the appraisal. The appraiser will enter the home thru the lock box with the key you provided us.
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 to 10 days 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 $200K, but the appraisal only came in at $190K and we will only agree to lower the price to $195K 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.
Fortunately, when we listed your home we reviewed the comparable properties that have recently sold, and priced your home accordingly. Additionally, we discussed the reputation the lender and the appraisers they use, and most likely we entered into contract with a lender who uses great appraisers, so most likely we will not have this issue.
If we do run into appraisal issues – we have other avenues to help get the appraised price up! We have been very successful in the past with providing the appraiser with details about the home, updates that may not be visibly apparent to them, along with details about if we had multiple offers and such – many times convincing them to increase their appraised value.