Tuesday, July 12, 2016

How Can an Appraisal Affect a Real Estate Transaction?

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This is Jedd and Kyle coming to you today fresh out of the barber shop with new haircuts and all the answers you need regarding the topic of appraisals.

What is an appraisal, and why is it so important?

An appraisal is a valuation report done by a certified, licensed appraiser to configure the value of a home. For example, let’s say you have a home under contract for $300,000. After your option period (or negotiation period, if you will), the lender is going to order an appraiser to go to the home, walk the property, examine it, and study comps to make sure that the house they’re lending $300,000 on is actually worth that price tag.

When is the appraisal ordered, and by whom?

It’s usually ordered after you come to a completion of the option period. That way we can make sure the buyer is committed to the transaction moving forward, because there is a cost (usually around $400) associated with the appraisal. Once we’ve come through the option period, we notify the lender to go ahead and order the appraisal. The buyer’s lender will order the appraisal, and the appraiser is then selected at random to view the property and determine it’s value and if it matches what the bank is going to be loaning on it.

How can the appraisal affect the transaction?

Here in Austin, we see a lot of people making offers above asking price. If an appraiser’s valuation configures a price that’s less than the one you’re under contract for (say, $310,000 instead of $320,000), you will have to either negotiate the seller back to the appraised value or make the difference up in cash because the bank will not lend you more money than what the home is appraised for. Worst-case scenario, this could kill a deal, but a good Realtor can prevent this from happening.

An appraisal is a valuation report done to configure the value of a home.

We hope you understand more about what an appraisal is, where it comes from, and how it affects a transaction. If you have any more questions about appraisals or anything else real estate related, give us a call. Thanks for stopping by.