Buy & Sell: Home Appraisals
The home appraisal is a key factor in buying, selling or refinancing your home. So how do you empower your decisions during the process? Start with these handy hints.
What Home Buyers Need To Know
- Once you have a contract to buy or sell a home, the appraisal is one of the first steps in the closing process.
- If the appraisal comes in at or above the contract price, the transaction proceeds as planned. However, if the appraisal comes in below the contract price, it can delay or derail the transaction.
- Here’s a secret advantage for buyers: a low appraisal can serve as a negotiating tool to convince the seller to lower the price so the transaction can move forward.
- Typically, banks won’t lend prospective buyers more than the home is actually worth.
- Buyers can use appraisals to avoid overpaying for homes — but sellers might feel that a low appraisal is inaccurate and be reluctant to drop the price.
- If a bad appraisal is standing between you and your home purchase, look into getting a second appraisal. Appraisers can make mistakes or have imperfect information. You will have to foot the bill, though.
What Home Sellers Need To Know
- As a seller, a low appraisal, if accurate, means you may have to lower your home's price to get it sold.
- Lenders won't approve loans for more than a home is worth.
- If you feel that your home's value has been impacted by nearby foreclosures and short sales, you might be able to convince the appraiser that your home is worth more if it's in significantly better condition than those properties.
- Sellers should also know that federal guidelines sometimes cause appraisals to come in below fair market value and can make low appraisals difficult to challenge.
What Refinancing Homeowners Need To Know
If you're refinancing a conventional mortgage, the home needs to be appraised at or above the amount you want to refinance. However, if yours is an FHA mortgage, you can refinance without an appraisal through the FHA Streamline Program.
Curious about what a home appraisal is all about? Find out more here.