Current home owners are not the only ones who have cause for concern over appraisals these days. Prospective home buyers have just as much need to be worried about whether their potential dream home will make the grade – and the value is only part of the concern.
The appraisal can make or break the deal for multiple reasons. The first concern is always the value. It would be assumed that the listing realtor did their homework and doesn’t have the seller asking more than what the house is worth. However, this is not always the case. Realtors run comps same as appraisers to help determine how much to ask for a home. However, sometimes the realtor won’t look at the same comparing factors between homes in the market when determining the value as what the appraiser looks for. The listing agent, of course, wants to get his seller the absolute highest possible value. Sometimes agents will use homes that aren’t truly comparable, either because of square footage, or certain upgrades, or they will give more value to upgrades than what the appraiser would give. Either way, sometimes it happens that the appraised value comes back lower than the contract asking price. This is not
always a deal breaker, if this happens there are two options – either the seller can lower the asking price, or the buyer can agree to pay the difference. In the majority of cases, the seller lowers the asking price, because really most people wouldn’t want to buy a home and start off paying more than what it’s worth. But unfortunately sometimes neither party will budge on what they want and end up having to part ways.
Another concern affecting appraisals is repairs. This is especially true on FHA appraisals which are more strict when it comes to repairs needed. These repairs are the sellers responsibility and sometimes if there are too many or the cost is too great and the seller can’t do them then it kills the deal.
One of the best ways a buyer can protect themselves from appraisal woes is to use a local lender. While the internet is full of enticing deals promising low rates and other great incentives, using a lender from a different state who isn’t familiar with the market can lead to a huge disadvantage. Many times if the lender knows the market and the appraised value on a property comes back low the lender can challenge the value if they think the appraisal is inaccurate. While loan officers cannot pick who does the appraisal or even speak to the appraiser to give their input, there are checks and balances put in place to make sure the appraiser that goes out is knowledgeable of the area and the market, and that can make a big difference in determining value. It is also important to use a
realtor who is local and familiar with the market you are purchasing in. A good realtor will know what to look for in terms of potential repairs and other factors that could affect the value of the home. And most importantly get a home inspection before the appraisal is done and study it closely. Many times there are issues on the home inspection that could become repair issues on the appraisal and if there is something major on there that could be a deal breaker it is best to catch it and have your agent discuss it with the seller’s agent beforehand. Most lending institutions make the buyer pay for the appraisal in advance and if it comes back as a deal breaker, that is several hundred dollars out of the buyers pocket that won’t be reimbursed.
Like any other aspect of buying a home when it comes to the appraisal make sure you do your homework, ask questions, get educated and work with a team of experts that can hopefully pinpoint any potential problems in advance.
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