Home appraisal tips – and what is home appraisal based on
Before anything else, what is home appraisal?
Good question! A home appraisal is a process whereby a licensed evaluator carries out a thorough inspection of a property to assess its true value (which is not always the same as the listing price).
The appraiser will compile all findings into a report and generate the appraised value of the home.
If the buyer is financing their purchase with a loan, the lender will normally be responsible for ordering the assessment. This is done to make sure the lender does not over-loan nor lend more money than the property’s worth. As such, some lenders may, in fact, require purchasers to include an assessment contingency in their bids.
Why do you as a
Why do you as a buyer care about home appraisals?
In general, the lenders base the amount of money they’ll allow you to borrow on the value of the property, and not the listing price. If you finance your purchase with a loan, your lender may need an assessment contingency to ensure that your loan does not exceed its value. In such cases, the lender will normally be responsible for coordinating the assessment or appraisal.
If the home you made an offer is valued at an amount lower than the price of your offer, you have some options:
- Make up the difference in price. As mentioned above, lenders use the estimated value of property to determine the amount of your loan. If the property is valued at a lower cost, your lender will reduce the amount of your loan. Or, you can increase your down payment to cover the difference between your new loan amount and the agreed-upon price if you really want to proceed with your purchase.
- Renegotiate the price with the seller. If you really want a home, but do not want an increased financial responsibility associated with a lower cost, you can negotiate with the seller for a lower purchase price. In a competitive market, where sellers receive several offers and bidding wars are common, this could be a long shot.
- Back out of the deal if you have an appraisal contingency. If you don’t want to pay the difference, and the seller is not willing to renegotiate the purchase price, an appraisal contingency allows you to cancel the purchase agreement. In addition, it allows you to recover your EMD (earning money deposit) as long as you have complied with the terms and time limits stipulated in your offer.
A good REALTOR® can aide you make the right offer for the property you’re interested in buying. For free valuation, contact us at 401-396-2888. We’re always glad to help!