As a home buyer, once you make an offer on a listing and the initial negotiations are agreed upon, such as sale price and contingencies, your next step is to have the house appraised. This is a lender requirement for approving mortgage funding. Knowing what to expect through the process will help you get through this last big hurdle towards closing and moving into your new home.
Homes are appraised not on the specific types of appliances which are installed, or whether there are wood floors or not. Homes are appraised on 5 key aspects relating to the property.
1) The age of the home
2) The condition of the home
3) Location, location, location
4) Sales of comparable houses nearby
5) Updates, renovations and additions
How these factors impact the appraisal of a property depends on the current local real estate market as much as it does on the appraiser’s ability to interpret the data. A well-maintained, older home in a neighborhood with historical substance, which the appraiser knows about is as likely to appraise well as a new, smart-enabled home built in the latest and most popular urban village.
The take away on knowing what an appraiser will look at, is to keep these aspects in mind when making an offer on a listing in the first place. I suggest working with your Realtor® to determine if the listing price is in an acceptable range for the market to help determine your offer price. Your agent can run comparable reports for you, so you can get a sneak-peek at what similar homes are currently selling for. If the price fits the parameters, go ahead and make the offer, just remember what you’re getting before an appraisal is a ball-park figure, the appraisal results may be different.
So, what can you do if there’s a significant difference between the appraisal report and the agreed sale price? It will depend on whether the appraised value is above or below the agreed price. If the property is valued below the mortgage you’re seeking, your lender won’t approve it.
The next step of the negotiation process is begun with your Realtor® helping you determine if there was something missed in the report or if there’s a way to shift the sale price to a value your lender will approve. This can involve working with the seller to lower the price, or you may need to consider walking away from the property, provided you included a contingency for an approved appraisal valuation in your offer.
If the appraised value of the property is greater than the mortgage loan you’re in a great spot, with immediate equity built into your home. As you and the seller have already agreed to a sale price, the seller can’t ask for more; you the buyer get to reap the rewards of owning real estate right away knowing your home is worth more than you owe.
There’s a lot more to know about how appraisals work and how they can impact home buyers. Learn more with this in-depth review by HouseLogic.com; educate yourself to buy with confidence. Whether you are buying or selling a home, you want it to be a stress-free and easy process. When you have an experienced Realtor® who genuinely cares about their clients, you have a valuable resource on your side every step of the way. The Driscoll Properties Team is ready to put our expertise to work for you. Learn more at our website, DriscollProperty.com, then contact the Driscoll Properties Team at 847-533-6786 to help you discover the home of your dreams.