In the euphoria of buying a home, many people get excited to get into their home without knowing all the necessary steps after signing a contract. There are dozens of things you need to do before the home closes. Most of the process is related to the homebuyer providing sufficient evidence that they are eligible for a loan. One of the significant steps in the process is getting an appraisal of the home’s value. What are some things you need to know about the appraisal process?
What happens when an appraisal comes in under the buyer’s offer?
When an appraisal comes through below what the buyer offered for the home, this creates some difficulties with lenders. Banks will deny loans on a home appraised below the value of the house. The lenders see this as a liability issue because they have to lend more money than the house is worth. If a low appraisal comes in, there are a few options. One, the buyer can come up with more money to pay for the difference. Two, the seller can agree to lower the price. If one of those two options don’t happen, the third option is that the buyer can walk away from the house.
What are some things you can do to improve your chances of getting the best possible appraisal?
Do your homework
The more you know about your house, the better you can get a feel for the value of the home. Get to know the value of the homes in the neighborhood. Find out what the worth is for households with similar floorplans, the same amount of rooms and bathrooms and square footage. Look at what houses recently sold for. Ask your agent to do some of the legwork for you as well.
Make sure you keep documents and paperwork about any improvements you make on the house. These improvements should increase the value of the home, but find out from an agent or other trusted professionals what they should be worth to the value of the house.
Having a clean home increases the chances that the house's appraisal value. It doesn’t take much to clean, and if something as simple as cleaning can improve your chances of a better appraisal, it would be a shame not to make a little effort to clean.
Educate the appraiser
When an appraiser comes to the home, you have the chances to educate them on the changes, and improvements made to the house. It isn’t your job to try to persuade the appraiser to increase the value. There may be things an appraiser doesn’t know, and if you do, it will help both you and the appraiser in the evaluation.
It is in the best interest of the borrower to get as much information about the appraisal as they can. As the data is time sensitive, don’t wait for the knowledge to come to you. Ask as soon as you can for documents so you can make an educated decision about the results as quickly as possible.
An appraisal is a non-biased third-party evaluation of a home’s value. While it may seem like it is preventing a sale from going through, it can be a good thing for the buyer, so they don’t make a financial mistake about the most significant purchase they will probably ever make.