Can a Home Appraisal Make or Break a Sale?
Once you place an offer on a home that you love and apply for a loan, lenders require that an appraiser come and determine the property’s true market value. Depending on the result of the appraisal, you may decide to settle, negotiate, or walk away from the sale completely. Take the time to learn about the best way to handle these different appraisal scenarios to ensure that you get the best deal on a home.
Why do lenders require an appraisal anyway?
Lenders always require that borrowers get appraisals on potential new homes to ensure the loan amount given is fair. Appraisals also serve as a way to protect buyers from paying for more than what a home is actually worth. Appraisals are a great “voice of reason” in a process that often has buyers and sellers relying heavily on their emotions. Keep in mind, an appraisal is different than an inspection; an appraisal is less detailed than the latter in that they only make note of obvious issues rather than underlying ones.
What if your home’s worth is deemed less than its selling price?
In most cases, appraisals come back to match whatever the home was originally listed as. But in some cases, an appraisal determines the home to be worth less than its listed price, meaning the lender would be making a bad investment. When this happens, what are your choices? While each buyer has their own unique set of circumstances, these are their general options:
- Decide to walk away from the home (which could result in you losing your deposit depending on the details of your contract)
- Have your agent negotiate with the seller to match the number the appraisal came up with, or a number in between
- Somehow prove the appraisal was made in error (which is very difficult to approve)
What if your appraisal comes in higher than the selling price?
If your home’s appraisal comes in higher than what you bought it for, then you got a good deal! The good news is that you have some equity on your home right from the start. Unfortunately, it’s extremely uncommon to be able to use this equity toward your down payment or closing costs.
Have you ever received an appraisal on a home that was above or below its selling price? Tell us about your experience in the comment section below.