If you plan to get a mortgage to buy your home, your lender will insist upon an appraisal to ensure that your home is worth what you are paying for it. This is not a form of consumer protection to make sure you are not paying too much, but an effort to protect the bank's interests. The lender usually puts a lot more money into the home that the buyer does!
Most of the time, my clients have appraisals at or even a bit higher than the sales price. But every once in a while, one comes in at a number lower than the contract price.
And then it all hits the fan.
First, the other agent and I look at the appraisal itself. If there are obvious mistakes that have lowered the price, we can ask the lender to appeal the results to the appraiser. Sometimes that works, ans sometimes it does not.
For a buyer, a low appraisal isn't the end of the world. There will be a lot of pressure on the sellers to lower the price to the appraised value - not a bad thing if you are buying. If they do not, you can walk away from the contract with your earnest money deposit.
But if you don't want to walk away?
If the sellers won't lower their price, you may have to increase the amount of your down payment in order to complete the transaction.
A few months ago, I had a transaction where the appraisal was low, and the seller refused to lower his price by a few thousand dollars to make the deal work. The buyers felt all along that they might be overpaying for the house, so they decided to move on.
But it had a happy ending, though not for the seller . The buyers just settled on another home, and the stubborn seller's house is still on the market unsold.
The good news is that once the appraisal is successfully completed, there isn't a whole lot more that can go wrong. Or can it?
Stay tuned for #9!
If you are planning a move to or from the Washington, DC area, I can help! I am licensed in the District of Columbia, Maryland and Virginia. You may call, email or text me at: