What to Know About Appraisals
These are the basics that you need to know about appraisals.
Appraisals have been a hot topic this year because prices have been rising and sometimes appraisals don’t match the sales price. Many people ask us if an appraisal is the same thing as a home inspection. No, but these two terms are easy to mix up because they both involve someone coming out to examine the property.
An appraisal is a valuation of the property, while a home inspection is an in-depth review of the systems and components of the home. Sometimes an appraiser is also looking for property condition requirements needed for certain types of loans; they have to ensure there are no issues that would prevent a buyer from getting their loan. However, an appraiser checking out some condition requirements is not a good substitute for a home inspection. You still need a home inspection to get a full picture of the home and what may need to be repaired.
If you don’t have an appraisal contingency and the sales price is higher than the appraised value, then the buyer is responsible for making up the difference between the sales price and appraised value. The appraisal contingency is a buyer’s built-in negotiation process if the sales price and appraised value don’t match.
"An appraisal is a valuation of the property, while a home inspection is an in-depth review of the systems and components of the home."
I advise speaking with a knowledgeable lender before submitting an offer without an appraisal contingency because it’ll allow you to plan for the worst-case scenario and know what your numbers will look like should the two values not match. The last thing you want is to simply not have enough money in the bank to bring to closing. The lender might help you restructure your loan terms or discuss decreasing your down payment percentage, which would keep your cash-to-close amount the same.
If you have further questions about appraisals or any other real estate matter, please feel free to reach out via phone or email. We would love to help you.