What is an Appraisal?

January 25, 2024

What is an Appraisal?

You may be thinking “What is an appraisal anyway? Do I need it? When does it occur?”

It's completely normal to feel this way. We hear this question all the time, especially after making an offer on a house and completing the inspection. The rest of the process, including the appraisal, underwriting, and title, can often seem a bit unclear to most people. Additionally, you might be thinking:

  1. Who pays for the appraisal?
  2. Who hires the appraiser?
  3. How much does an appraisal cost?
  4. What happens if the appraisal comes in lower than the purchase price of the home?

These are all great questions! For answers click here for a great article from US News filled with all of the answers you’re looking for.

So what do you do if you’re the buyer paying $500,000  for a home, but the appraisal only comes in at $450,000? Scream… no, it’s not time to panic. There is a problem, yes, but not something we can’t try to negotiate. Here is an article that does a great job of explaining what your options are in that situation.

But what if you're the buyer paying $500,000 for a home and the appraisal value comes in right at the purchase price? Is this a positive or negative outcome? This is a positive outcome because it means the bank will provide you with a loan for the full amount of the purchase price.

But what happens when an appraisal comes in high, meaning the appraisal amount is over the purchase price? Does this happen very often? No, it's very rare for an appraisal to come in over the purchase price, as the bank simply needs to ensure that the property is worth the purchase price so they feel comfortable providing you with a loan. Therefore, it's not common for an appraisal to exceed the purchase price. When it does, buyers are often thrilled because essentially, you now have instant equity as we secured you a great deal! Occasionally though, if your home comes in significantly over the purchase price (say $50K or $100K over the purchase price), it can cause problems. In this scenario where a home comes in significantly over the purchase price, sometimes the underwriter will wonder if there was something shady going on that allowed you to get such a great deal.

So, as the buyer, all in all, it’s best when the purchase price comes in at or close to the purchase price.

Questions? Reach out to us anytime at info(@)quartermangroup(dot)com. 

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