Home Buying, Step 1. Making an Offer ~ Home Buying, Step 2. Disclosures
Most Home Buyers make a down payment that goes towards the purchase price, thus reducing the balance that comes in the form of a bank loan. However, banks don’t just hand over money without an appraisal. Essentially an appraisal is a document provided by a 3rd party appraiser, paid for by the Buyer, which confirms that the home buying contract price is in line with other comparable home sales (aka comps) in the neighborhood.
An appraisal can be a potential deal-killer if the comps don’t come in – in the right price range, as the bank may deny the loan or change the terms.
Just imagine how you would feel if you found a home you really love you’ve made an offer and it has been accepted, the property passed the home inspection, you’ve provided all of the financial data that the bank asked for and then you get a call from your Realtor saying the property appraised for $50,000 less than your accepted offer.
Appraisals must be based on recently settled transactions, however, sometimes in a rising market past transactions are likely to be lower in price. For that reason it’s important to understand the risks involved around low appraisals — and the options available to you.
What You Can Do About It
Most banks have a process by which you can dispute an appraisal. This generally requires the buyer or their agent to supply other comparable sales and explanations as to why they think the appraiser’s value is off. The review takes some time and can go either way. If it fails, you may or may not have options.
- If both parties still want to move ahead, the best plan is to extend all time frames and switch to a new lender.
- Another option is to reduce the purchase price, if both parties agree.
- The final option, depending on the deal, is for the buyer to bring more money to close.
It makes the most sense for all parties to work together to keep the deal going. *Source: washingtonpost.com
If you are in the market to buy (or sell) a home in Northern California, Realtors associated with Century 21 M&M look forward to walking you through the process. Rest assured that Century 21 M&M Realtors will do their best to make sure that both Buyers and Sellers are protected during the transaction.