Appraisals and your Closing
When a buyer is getting a loan, the home will need to appraise at the contract price. There are a few exceptions such if the buyer is putting down a substantial down payment. In an appreciating market, the appraisal can come in low leaving the seller and the buyer with questions of what to do next. In a seller's market, appraisal issues can become more common. It is important to be prepared in advance of the appraisal process. The good news is with a cash buyer, there should not be an appraisal. When the buyer is using a lender, the type of loan they are using can impact the type of appraisal that is ordered. A Conventional and VA appraisal stay with the deal only, however an FHA appraisal sticks with the home for 4 months. No matter what type of loan the buyer is obtaining, it is important to have an expert agent to price a seller's home as accurate as possible, as well as know how to avoid surprises with the appraisal.
Appraisal Basics & FAQ's Answered
Who pays for the appraisal? The buyer pays for the appraisal fees.
Who orders the appraisal? The lender will place a request for the appraisal as a part of the application process. The seller, buyer and lender do not select the actual appraiser. It is usually done by rotation or ordered by a 3rd party company.
When should the appraisal be ordered? The appraisal should be ordered in the early stages of the loan application as if there is an issue with the appraised both buyer and seller will want to know early on in the contract period.
How long does an appraisal take? The amount of time that an appraiser is in the house is very limited. Most of the time it will be 30-60 minutes at the most. The appraisal is usually received within 2-4 days.
How a Low Appraisal Impacts the Sale
A low appraisal can be a challenge that could cause your deal to fall apart. This is one of the most stressful times. Now that the appraisal is done, we have to figure out what to do as it has come in low. The best way to fix a low appraisal is to actually not have the challenge to begin with as it is hard to have it raised.
Does a low appraisal mean the home is not worth the contract price? Not necessarily. The type of financing and even the appraiser can impact the value. An appraisal can come in low due to a number of things: the home being over priced, errors in the information or the appraiser using the wrong homes as comparable sales. Knowing which loan types are having appraisal issues is one of the benefits of using a real estate agent that does a lot of deals.
In the case of a low appraisal, there is most certainly another negotiation. Who will bridge the gap? What are the options? There are 4 solutions to an appraisal issue. The buyer can pay it, the seller can pay it; they can split it or the deal is cancelled and the home goes back on the market. If the appraisal issue can't be solved, the buyer will receive their earnest deposit back.
Having a real estate team that understands the appraisal process is critical. We'd love to help you get to the closing table.