The Home Buying Process: Get An Appraisal
Getting an appraisal is a very important part of the home buying process. No lender will finance a house for you without an appraisal. In short, an appraisal is a good faith estimate of the value of the property. They are really put in place to protect the lender but having one done will help you out, too.
An appraisal ensures that in the event of a worst-case scenario, the lender doesn't get stuck with a house that is worth less than what they lent you to purchase it. The problem with appraisals is that they typically are not conducted until after the seller and the buyer have agreed to a purchase price and signed a contract. This is what makes the appraisal process so tense for everyone involved. Most of the time the buyer orders and pays for the appraisal, which is funny because it protects the lender. The buyer will not even get a copy of the appraisal unless they request one. Appraisals are always sent directly to the lender.
Appraisals And Home Inspections
It is easy to get the two confused, and many people do. They cost about the same, depending on the part of the country you are in. However, the inspection process usually comes before the appraisal. They do consider many of the same elements. A home inspector looks at the condition of the home, trying to find issues that may cause you financial strain later. An appraiser looks at the home inside and out trying to determine its fair market value. Now if there is an obvious issue, the appraiser may request a home inspection. They may be willing to take a copy of the report from the inspection that has already been performed but sometimes they want their own independent inspection. They will also use comparable houses in the neighborhood to help determine the property value.
Property Appraisal Amounts
Waiting for a property appraisal can be a tense time for all parties involved. As stated earlier, you will need to request a copy for yourself if you would like a written copy. Otherwise, your real estate agent or lender will likely tell you what the property appraised for. If the appraisal comes back as at the sales price or higher, then you will likely get the mortgage you asked for. This is, of course, given that your credit is in good shape. However, if the appraisal comes back lower than the sales price, the lender will probably reduce the amount of the loan to match the appraisal. Hopefully, you wrote a contingency upon appraisal clause into your contract. If you did, then you have the option to renegotiate the sales price or walk away from the deal.
Additional Options For Dealing With Low Appraisals
If your appraisal comes in low and you really want the property, or you didn't put a contingency clause in there, you do have some other options. It is typically best not to exercise them, but they are there. One option is to put more money down to try to cover the difference between the appraised value and the sales price. It may eat into your savings, but that is the easiest way to go. You can also dispute the appraisal. Ensure that there are no clerical errors in your appraisal and verify that the correct square footage was used for the figures. Appraisers are human, and they get busy. Sometimes square footage gets missed. Find out what comparable sales were used in your appraisal and see if your agent may be able to find some other comps that would support a higher valuation for your appraisal.
An appraisal is necessary in order to secure financing. If the lender is happy with the appraisal, they'll be willing to finance the home. If the lender is not happy with the appraisal, you may need to seek out other options. Getting a satisfactory appraisal is not difficult, but it is an integral part of getting financed for the home of your dreams. Even so, don't let this scare you away from taking the steps to owning your own home.