The Appraisal Process
 An appraisal is a written estimate
of a property’s market value
completed by an
appraiser. The value is based upon a market analysis of the prices of
recent sales of similar properties in the area and the property’s physical
condition. Usually, this requires an interior and exterior property
inspection.
Why is an Appraisal Necessary?
Lenders use your appraisal to determine your loan amount. Your appraisal
will be completed shortly after you request your mortgage.
Appraisals and Sales Prices
If the appraised value is qual to or higher than the
sales price, there is no impact to the buyer. In the case of a
higher appraisal, the amount exceeding the purchase price becomes
immediate equity to the buyer at closing. In other words, the home
is worth more than the buyer is paying for it!
When the property appraises for a lower
value than the sales price, the lower appraised value is used to determine
your loan amount.
If the property value is less than the
amount of your offer, then the seller has the option to accept the lower
amount to guarantee the sale, or the seller may elect to terminate the
contract. A third option is conceivable, whereas the the buyer may increase the down
payment to make up the difference between the appraised value and the
purchase price.
A property which is under appraised can foster an emotional outcome ---
both parties need to be calm at this juncture and try to find an
alternative to achieving a WIN-WIN for both parties.
This author (Beryl Gosney) has only had one transaction where resolution
was not achieved. A seasoned agent should be able to derive
recommended alternatives. But the key is to control the emotions
on both sides until an equitable solution can be reached.
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