How Important Is The Appraisal When Selling Your Home?
When you get an offer on your home and accept it, you might think it is a done deal. While the transaction may go through without any problems, the deal is not finished until both parties sign the closing documents. Before that can happen, though, a lot of steps must occur. Among these steps is the appraisal of the home. As the seller of the property, this assessment is a critical part of the closing process. Here are three things you should understand about the importance of the appraisal.
The Appraisal Reveals the Home's Current Worth
The goal of getting an appraisal is to find out the current worth of the property. You cannot use an old appraisal from the house, as appraisals expire after a while. You must get a new appraisal completed each time a home sells. A new assessment of the house will tell you, in today's dollar value, how much the house is worth. This amount is vital for the transaction to go through.
The Value Controls the Amount the Bank Lends to the Buyer
When the appraiser completes the process, he or she will submit a copy of the report to all parties involved, including the mortgage lender. The mortgage lender will evaluate the report and may adjust the amount of the loan afterward. Lenders will only loan a specific percentage of a home's worth to a borrower. If the percentage is 90%, the 90% is on the appraisal amount, not on the purchase price amount.
For example, suppose a person offered to pay $200,000 for your house. If the real estate appraiser tells you that the house is worth $195,000, the mortgage lender will base the numbers on the $195,000. As a result, the buyer of the home may need to come up with more money down to make the loan work.
The Buyer Can Void the Deal
In most cases, buyers include a contingency in their purchase offers that relate to the appraisal process. This contingency gives the buyer the right to void the deal if the house value is not high enough. If the appraisal comes back with an amount that is less than the offer amount, the buyer could walk away from the deal without losing anything.
As you can see, there is a lot at stake with the appraisal of your home when selling. If you have questions about this, talk to your real estate agent or an appraiser in your city.