When you purchase or refinance a home the lender may order an appraisal to ensure that the value of the home does not exceed the loan amount, so that they can protect their investment. The appraiser will assess the condition of the market
and the most recent similar sales within the area. There are specific criteria that they consider. Some factors they evaluate are:
- size and type of home
- number of beds and baths
- condition / updates
- location within the neighborhood
If the home appraises less than the purchase price, the lender will only base the loan on the assessed value. This can leave a gap. This can be remedied in various ways, typically this is where negotiations will occur. The seller can lower
the sale price to meet the appraised value, the buyer can increase the cash paid at closing, or both parties can make some concessions to bridge the gap.
When the offer to purchase is drafted, it is possible to add a contingency to say that the property must appraise at or above the purchase price, or the buyer has the ability to withdraw.
In this fast moving market it is important to have an experienced Realtor on your side to help you navigate this process.
For more information on the home purchase or sale process, contact us today.