Step 13: 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 formal report regarding the value of your home.
Here’s a little more info about appraisals and how they affect a real estate transaction. https://www.realtor.com/advice/buy/before-you-buy-4-questions-home-appraisals
- 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 weekday hours.
- Do I need to attend the appraisal? No, you will not attend the appraisal but your home needs to be showroom ready when the appraiser is there. We will have an appraisal package available in the home if we are concerned about meeting our appraisal price.
- How long does the appraisal take? Usually about 30 minutes but up to an hour depending on size and amenities.
- How long until we know if the property appraised for the purchase price? Usually a week to 10 days after the appraisal appointment. The appraiser has 10 days to reply. 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 refunded in the case of a low appraisal due to being unable to obtain a loan for the agreed amount on the contract as part of the financing contingency.