Of all the steps in the home buying process, the appraisal might be one of the most important. The appraisal impacts both the buyer and seller. The home's appraised value could potentially result in a rescinded offer if the seller is not careful. If you are the seller, here is what you need to know about the appraisal.
How Does the Appraisal Impact You?
The appraised value is what your home is estimated to be worth based on various factors, including the prices of homes in your area, the amenities in your home, and its overall condition. The value determined by the appraisal is not necessarily how much your home can sell for. It is merely what it is worth to the bank.
It is important though. If the appraisal value is below the asking price, the buyer's lender might refuse to fund the full amount of the loan. If that happens, the buyer could potentially back out of the purchase agreement if he or she is unable to pay the difference or you are unwilling to lower your asking price.
Another potential issue that could result is the buyer could find out the appraised value for your home and attempt to negotiate for a far lower purchasing price. In a seller's market, you can possibly find another buyer willing to pay the asking price. In a buyer's market, you might be forced to take a lower purchase price.
What Can You Do?
Some sellers choose to get an appraisal of their home's worth before they list it on the market. If you know the appraised value, you can set your asking price at or near it to avoid problems with the bank. You can also learn what you can do to potentially increase the value of your home. For instance, upgrading the kitchen could help.
Getting your own appraisal can also be useful if the buyer's appraiser values your home lower than the value you received. You can check your appraisal report against that of the buyer's appraiser to determine if there were errors that led to the incorrect appraisal value.
You and the buyer can also work together to resolve the issue of a low appraisal. For instance, the buyer could agree to pay part or all the difference between the appraised value and asking price. If so, the bank should cover the rest of the price.
To learn more about the appraisal value, talk to your real estate agent.Share