Finding the right home and making the deal you like is not always easy but now you have an accepted offer. You’re not done yet!
Now it’s time to find out if an independent appraiser thinks your home is worth enough so that the bank gives you final approval on your loan.
The appraisal is done by an independent, state licensed, certified real estate appraiser. This means they do not work for either the bank or any real estate company. They are free of outside influences.
The appraisers job is to first, do a walk through of the property looking at things like amenities, overall condition, and anything that he thinks might have an effect on the value, whether positive or negative.
Next, the appraiser will go back to his office and look at comparative home values. These are homes within a short distance that have sold within the last six months.
Ideally, he will find at least three.
Then he will make adjustments to the comparables to insure that it is really an apples to apples comparison.
Finally, he will forward on his conclusion to the lender.
This is where the decision is made regarding the loan. If the home appraises at a value that justifies the loan, the bank will give final approval to the loan.
If it does not appraise at a value to support the loan, then there is some negotiating to be done.
Either the seller will concede on price to match the appraisal, or, if the seller refuses, the buyer must make up the difference. It’s then up to the buyer to decide if they want to go forward.
Another issue we are seeing currently, is that because of rising prices, appraisals that look at market prices too far back can cause a lower appraisal.
This is where a good real estate agent that is on top of the market really earns their commission.
Good agents can sometimes add some assistance in terms of finding recent comparables.
Finally, a word of caution. There are a number of websites that claim to be able to give you the value of a home.
They are not true appraisals. They use a software model that uses past sales, tax rates, and a few other variables. They do not know about condition and marketability which can really effect value, so sometimes they’re right and sometimes they’re not.
Buyer or seller beware!
Kelley Knitz has been a RE/MAX agent for over 26 years and is in the RE/MAX Hall of Fame and is a long time member of the Toledo Board of Realtors Million Dollar Club.
1911 Indian Wood Circle
Maumee, OH 43537