Step 19 to Selling Your Home: Appraisal Time

If the buyer is planning to get a mortgage to complete the purchase of your home then the lender will require that an appraisal be conducted. The appraisal is different from a home inspection. The appraiser’s main objective is to confirm the home is ‘livable’ (working water, heat, etc) and assess the value for the home. So what is an appraisal? Read this blog post to find out!

Who orders the appraisal?  The buyer’s mortgage lender orders the appraisal at the buyer’s expense.

When does the appraisal occur? Usually during daylight hours. Some buyers may wait until after the inspection negotiation period is completed. Overall, it should be ordered no later than 2 - 2.5 weeks from the singing of the contract. 

Do I need to attend the appraisal? No, as the seller, you will not attend the appraisal. Instead, we’ll meet the appraiser at your home and walk him/her through the property. We have a packet that we like to provide the appraiser that will give some background information on your property - such as the upgrades/additions done to the home, comps and details as to why we think the purchase price is justified.

How long does the appraisal take? Usually about 15-30 minutes.

How long until we know if the property appraised for the purchase price? Usually a week to 10 days after the appraisal appointment.  The appraiser is usually given a week to submit the written appraisal report to the mortgage lender. The report is reviewed and approved by the lender’s appraisal team. Once that is complete, the buyer’s mortgage lender forwards a copy of the report to the buyer to let the buyer know whether the property appraised at the purchase price, below the purchase price, or above the purchase price and if any repairs are being requested.

If the property appraised at the purchase price, nothing further needs to be done and the closing process will proceed as planned.  If the property appraises for less than the purchase price, we have a problem. That means the bank will only give the buyer a loan based upon the appraised value.  In this case, the buyer will often come back to us with a copy of the appraisal report and ask to renegotiate the purchase price down to the appraisal price.  Of course, we will review the comps used in the report and compare them to what we provided to the appraiser. We will give the appraiser a call to get clarification on the comps used or reasons why the comps we provided couldn’t be used. Ultimately, we will need to decide if we wish to dispute the value to see if the appraiser will adjust to the sales price, change the purchase price to the appraised value, meet in the middle with the difference or stand firm. If we do not adjust the price, the buyer has to come up with the cash difference (the difference between the appraisal price and the purchase price) at closing and many buyers can’t or won’t want to do that. For instance, if the purchase price is $600K, but the appraisal only came in at $575K and we will only agree to lower the price to $580K then the buyer has to decide if he or she is going to bring an extra $5K on top of the down payment and closing costs to closing or cancel the transaction.  If the buyer walks away, his or her earnest money is usually refunded in this case. It really depends on the terms/clauses agreed upon in the initial contract.  

The PA contract has an addendum that can be included at the time of the offer which states how the transaction will proceed if the appraised value differs from the purchase price.