First lets start this Home Appraisal Guide by defining appraisal. The webster dictionary defines ‘appraisal’ as:
the act of judging the value, condition, or importance of something : the act of appraising something
something that states an opinion about the value, condition, or importance of something
So simply a home appraisal is an educated opinion on the cash value of your home in the current market. So why are home appraisals so important in a real estate transaction? Well the number one reason is that no credible lender will loan you without a home appraisal being done (and meeting the value you are offering) on the home you are purchasing. Basically they want to cover their behind. Lets say you decide to stop paying your mortgage payments and they need to foreclose on the property – they want to make sure they can sell it for at least the loans value.
Here is a real life example: Lets say Bobby Boy want to buy a house – he finds this cute little house and writes an offer for $250,000 and the seller accept his offer. Well, after the offer has been accepted, the Bobby’s lender orders the appraisal. Now after looking at the other comparable properties in the area (and doing all the things appraisers do) – the appraiser sees that nothing in the neighborhood or in the area has sold over $200,000. So the appraisal comes back to the lender saying the value of the home is up to $200,000. Obviously, the lender is not going to want to lend Bobby Boy the money for this property. So either Bobby Boy and the seller can re-negotiate the price, Bobby Boy can bring the difference, OR he needs to find a new property. There is another option for Bobby Boy – he can appeal the appraisal. Usually, an appeal can work in the buyer and sellers favor if there was a mistake in the original appraisal. So lets say that the appraiser only have 2,000 sq ft but really the property is 2,500 sq. ft. that could make a difference in the value. It will then be up to the lender to accept that appeal.
Appraisals are a very important part of the transaction and can lead to a lot headaches when they don’t appraise. The good news is: in this example it kept Bobby Boy from buying a house that was $50,000 over market value. The best way for a seller to get an appraisal at value is to price the property based on the market and to have a real estate agent who meets with the appraiser to explain and share the comparables properties you used to come up with the price of the home.
If you have any other questions about home appraisals – please reach out to us anytime at 615-310-8661 or lisa@nashvilleonthemarket.com.
xoxo,
Lisa Stigliano of the Nashville on the Market Group
