If a mortgage is required to purchase or sell a home, the lender will require a home appraisal. An appraisal is an unbiased and detailed report on the value of the property, evaluated in person. The buyer pays for the inspection and it can cost several hundred dollars. As the party paying for the third-party appraisal, the seller does not have a right to see the inspection report unless you are requesting repairs or there is evidence of defects that have greatly affected the home price. In those cases, only the information pertinent to the repairs or defects is required evidence for the seller. The buyer is not required to share the entire inspection report.
If the home value price is under the offered price, the lender will not approve your loan unless you can make up the difference, most likely in cash. You could also challenge the appraisal and get a second opinion. You could see if the seller would offer financing for the difference. Or, if you are willing and able, decide to pay cash for the total home price.
If the appraisal comes in higher than the amount you agreed to pay for it, congratulations! You just made a terrific deal and your deal will go into underwriting with the lender. It is possible that the sellers may want to pull out of the contract if the appraisal is significantly higher than your offer, but they may not have legal room to do so and you might be entitled to compensation for any expenses or loss as a result of pulling out of the deal. Your broker should help you stay on top of this as part of their real estate services.
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Humans are infallible. If you get an appraisal that is much lower than what you think is reasonable, you should challenge it. Even though appraisals are supposed to be unbiased, it is possible for an appraiser to hold bias against particular neighborhoods or areas. If you suspect bias in your appraisal, do your research and essentially perform your own appraisal using the latest comparable properties. You can write a letter to your lender with the information you've gathered with a critique of the appraisal you received. You can ask them to pay for a second appraisal or you can order your own. You can also arm your real estate broker with the information you gathered and see if the appraiser would be willing to reconsider their appraisal.
John P. Sharp, Premium Real Estate Broker with Skyline Properties, Inc.
19515 North Creek Parkway, STE 214, Bothell, Washington 98011, United States
Call us today at 425-230-2525
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Premium Real Estate Broker with Skyline Properties, Inc.
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