Appraisals: Coming in high…or low.

Appraisals are a critical part of buying, selling, or refinancing your home. An appraisal consists of an inspection of your home that assesses the overall value of the property. The appraisal considers the home’s condition, features, and neighborhood, and lets you know if the home is “worth” the price listed on the contract. It is essentially protection for a lender; lenders do not want to lend a buyer or homeowner more money than the home is worth. 

Ordered by the lender, the homeowner and agent typically have no control over who appraises the property. The appraiser must be as impartial and unbiased as possible. In addition to inspecting the home and its features, the appraiser also consider the neighborhood and overall market trends. Once the inspection is completed, the appraiser then prepares an analysis and report. If the appraisal comes in at or above the list or contract price, the transaction will continue as planned. If it comes in lower than the list or contract price, the transaction can be delayed. 

As a buyer, if the appraisal comes in at or above the contract price, there should be no delays with the transaction. An appraisal that comes in lower can mean there is a chance to negotiate a lower price. This is great for a buyer if the seller is willing to negotiate. Not only do you get your dream home, but it can be a lower price than originally anticipated. 

As a seller, a higher appraisal is clearly more desirable, as a lower appraisal can delay the deal or even result in the seller losing the profit. If the seller is able to negotiate the price, the deal can continue. Oftentimes, the seller will choose to take the home off the market and re-list in later months. 

Appraisals on homes are valid for a set period of time. For example, a conventional appraisal is valid for 90 days, a FHA appraisal is valid for 120 days, and a VA loan is valid for 180 days. For sellers, this means that it could take 3-6 months for a home to get a new appraisal – and preferably one that is at or above contract price. 

While appraisals can seem overwhelming, they are another step in the home buying or selling process. Reach out to your realtor at any stage in the process for questions regarding your transaction. And remember, a lower appraisal won’t prevent a transaction, it might just delay the deal for a short time. 

-S

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