Appraisals
Before investing in an appraisal, employees will want to use the option period to complete all property inspections to their satisfaction. At that point, the real estate agent will let them know that the contract is a "go" and an appraisal is ordered.
A certified appraiser will visit the property, measure it, and note the property's features and condition. The appraiser compares the property to other recent comparable properties sold, and adjusts the value to account for differences in size, age, condition and features. Their professional opinion of value, or appraisal, is used by the lender to determine that there is enough value in the home to justify the sales price and the mortgage amount. For this reason, appraisals are normally conservative. One should not be disappointed if the appraised value is very close to the sales price; the appraiser's function is simply to validate what is going to be loaned or paid.
What happens if the appraisal comes in less than the sales price? Several options are available.
- The seller may agree to lower the sales price to the appraised value.
- The buyer may choose to take the home at the agreed upon original sales price and increase the down payment to cover the difference.
- The buyer, and/or the seller, may contest the appraisal. The agents can provide newer, or different, comparable sales information, and ask the appraiser to reconsider the value previously stated.
- Lastly, the buyer can decide not to buy the house and have the earnest money refunded.
