What is an Appraisal?

What is an Appraisal?

According to the Merriam-Webster dictionary, an appraisal is an evaluation of property by the estimate of an authorized person.

You may be wondering “Ok. What is an appraisal anyway? But I thought they already did an inspection and we did a CMA. Do I need an appraisal? When does the appraisal happen?”

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. You may also be wondering:

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

These are all great questions! For answers click here for a great article from the National Association of Realtors on Appraisals 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 anarticle that does a great job of explaining what your options are in that situation.

But what happens if you’re the buyer paying $500,000 for a home and the appraisal value comes in right at the purchase amount price?  Is this good or bad? This is definitely a good thing as 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 (where the appraisal value is more than the purchase price) and how often does this happen? Hardly ever. , No, it’s very rare for an appraisal to come in over the purchase price as the bank just needs to know that the property is worth the purchase price so they feel comfortable giving you 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 which is explained in this article.. 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.