When it comes to buying or selling a home, reaching an agreed-upon price is a significant milestone. However, the finality of the deal depends on the appraisal process. Today, we will delve into the whys, hows, and whens of real estate appraisals and explore their crucial role in the transaction.
1. When is an appraisal needed? Whether you’re a buyer, seller, or refinancing your home, an appraisal is typically required. It serves as an unbiased assessment of the property’s value and plays a vital role in determining the loan amount for borrowers.
2. The purpose of an appraisal. An appraisal is primarily needed by lenders to ensure that the borrower is not obtaining a loan that exceeds the property’s actual value. While the appraiser works for the lender, the report provides valuable information for both buyers and sellers.
3. The appraisal process. Once the need for an appraisal is established, the appraiser will schedule an appointment to visit the property. During the assessment, they thoroughly examine the interior and exterior of the home, as well as evaluate the neighborhood. Their research includes analyzing recently sold comparable properties to determine the estimated value of the property. The appraiser then submits a detailed report to both the buyer and the lender.
“The finality of the deal depends on the appraisal process.”
4. Cost of the appraisal. In most cases, the buyer is responsible for covering the appraisal fee. It is an essential investment to ensure an accurate valuation of the property and protect the interests of all parties involved.
5. Utilizing the appraisal report. Receiving the appraisal report can bring different outcomes, depending on the appraisal value compared to the agreed-upon offer:
- Matched Offer: If the appraisal matches the offer, it is good news for both the buyer and the seller. The lender will proceed with finalizing the loan, and the transaction can move forward toward closing.
- Higher Appraisal: If the appraisal comes back higher than the offer, it benefits the buyer. This implies that the property will have instant equity upon closing, providing a strong foundation for their investment.
- Short Appraisal: In the event of a lower appraisal, several options are available. Buyers can work with their realtor to renegotiate the contract price, consider an appraisal gap (paying the difference between the appraised value and the offer), or choose to walk away from the contract.
Appraisals play a crucial role in real estate transactions, providing an unbiased evaluation of a property’s value. Understanding the appraisal process and its potential impact on the deal empowers buyers and sellers to make informed decisions. At the Josh Vernon Group, our dedicated team is committed to guiding you through every step of the home-buying process. Reach out to your favorite Josh Vernon agent with any questions or concerns you may have.