Understanding Home Appraisals
After months of driving around looking at various homes with your Realtor, you’ve finally found it! The home that checks off all of your must-have items. When purchasing a home, one of the most important items to tick off the list is the home appraisal.
What is a Home Appraisal? An appraisal is the estimated value of a property determined by a qualified appraiser. An appraiser will give an opinion of the property’s fair market value based on their knowledge, experience, and the following:
Current Real Estate Market (Current sales trend for similar properties within the surrounding area)
Structure of the Home
Square Footage and Number of Bedrooms/Bathrooms
Upgrades and Renovations
The appraisal is important to all parties of the transaction. The buyer, seller, real estate agent, and lender all look at the appraised value to determine what the home is worth. If the appraised value comes in too low, the buyer will have an opportunity to either cancel the contract or re-evaluate the purchase price and come to an agreement with the seller in order to move forward with the transaction.
How Do I Handle a Low Appraisal? First of all, don’t panic! Your real estate agent and your lender are your best resources when dealing with the finer details of a transaction. A lender’s main concern with a low appraisal is they want to ensure the buyer is not borrowing more than the home is currently worth. Oftentimes, sellers can offer to lower the purchase price in order to move forward with the transaction. Your real estate agent can supply a list of comparable sales (nearby, similar homes that have recently sold or are currently on the market) to the lender justifying the agreed-upon sales price.