What happens when an appraisal doesn’t match the agreed-upon price of a home? Today, we’ll discuss how buyers and sellers can overcome appraisal challenges during a transaction.
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Want to sell your home? Get a home value report
Want to buy a home? Search all homes for sale
When appraisals are involved in your real estate transaction, there are a couple of issues that can arise that I want to point out to you today.
Unfortunately, some real estate transactions will have an appraisal that does not meet the home’s market value. That can be a messy situation when you have deadlines and contingencies involved.
Luckily, there are a few options for buyers and sellers to avoid this.
First, it’s important to know there’s not an exact science for appraisals. You can hire 10 different appraisers and get a 10% to 15% difference in value on either end of the spectrum. The appraisal is only another person’s opinion of your property’s value, anyway.
A buyer will pay true market value for your home. However, a bank can’t lend on whatever a buyer is willing to pay. The bank needs some way to protect itself in the instance that a buyer defaults on the loan and cannot make the payments. Appraisers are hired mainly to protect the bank.
Unfortunately, some real estate transactions will have an appraisal that does not meet the home’s market value. That can be a messy situation when you have deadlines and contingencies involved.
Luckily, there are a few options for buyers and sellers to avoid this.
First, it’s important to know there’s not an exact science for appraisals. You can hire 10 different appraisers and get a 10% to 15% difference in value on either end of the spectrum. The appraisal is only another person’s opinion of your property’s value, anyway.
A buyer will pay true market value for your home. However, a bank can’t lend on whatever a buyer is willing to pay. The bank needs some way to protect itself in the instance that a buyer defaults on the loan and cannot make the payments. Appraisers are hired mainly to protect the bank.
You can hire 10 different appraisers and get a 10% to 15% difference in value.
What can you do if the property doesn’t appraise? As a buyer, depending on the loan, you can make up the difference, renegotiate with the seller, or terminate the contract. Unfortunately, as a seller, you can’t terminate the contract. However, you can negotiate or drop the purchase price down to the appraised value. You can also decide to proceed with the agreed-upon price.
Can you correct an appraisal if you feel it’s wrong?
Sometimes, we can get the appraiser to correct the report if something is blatantly wrong. Other times, the appraiser won't admit a mistake. I’ve even seen an appraiser not include the value of a pool on the property! That’s a lot of money that went unaccounted for. Sometimes, the bank will reject a report that is obviously wrong, but more often than not, they’ll go ahead and accept the appraisal.
If you have any questions about how to deal with appraisal issues or you’re thinking about buying or selling a home in the McAllen area market, give us a call or send us an email today. We would be happy to help you!
Can you correct an appraisal if you feel it’s wrong?
Sometimes, we can get the appraiser to correct the report if something is blatantly wrong. Other times, the appraiser won't admit a mistake. I’ve even seen an appraiser not include the value of a pool on the property! That’s a lot of money that went unaccounted for. Sometimes, the bank will reject a report that is obviously wrong, but more often than not, they’ll go ahead and accept the appraisal.
If you have any questions about how to deal with appraisal issues or you’re thinking about buying or selling a home in the McAllen area market, give us a call or send us an email today. We would be happy to help you!
