What’s in an Appraisal? Why should you care?
A seemingly boring topic; the Appraisal can be your worst nightmare. When you make an offer on a property, or if you are selling a property, as long as there is a mortgage involved, the property needs to appraise. That means that a professional property appraisor reviews comparable sales in the immediate vicinity within the last three months and compares your home or the home you want to buy to those properties.
What happens if the home appraises for LESS THAN your offer price? The Bank will only loan to the appraised value of the home. At this point, you can:
1) make up the difference to the seller out of your pocket
2) ask the seller to reduce the price of the home to the appraised value
3) walk away from the deal
4) Ask the bank to get another appraisal done (you will be asked to pay for this)
Does an low appraisal mean the home is worth less than what you offered to pay?
Not necessarily. There are a lot of appraisors working in areas they are unfamiliar with, thanks to the new “RESPA” laws, passed in January, 2010, the goal of which was to safeguard consumers. That’s not exactly how it’s turned out.