Three Things to Know About Them
1. They determine the value
of a property according to a professional opinion
2. The process is subjective
and appraisers come up with different values
3. An agent should be there
to help the appraiser assess the property
While inspections examine a property for glaring defects, appraisals are a professional’s determination of a property’s value. The buyer’s bank orders and pays for an appraisal to determine both the size of the loan and monthly mortgage.
Appraising the value of a property is a subjective process. The best way to evaluate the actual price of a property is to be intimately familiar with the neighborhood where it’s located. Appraisers, however, can work all across the city, county, or even state. It’s simply not possible for an appraiser to earn their living working in a single neighborhood.
That’s why it’s a good idea for a real estate agent who is familiar with the neighborhood to be on hand for the appraisal, especially when that agent represents the seller. A knowledgeable agent can draw the appraiser’s attention to comparable nearby homes and ensure the appraisal is in line with the local market.
Deals can run into trouble when the appraiser comes back with a dollar number that doesn’t match the value the buyer and seller agreed to in their contract. If the appraised value is less than the agreed upon price for the home, the bank won’t extend enough money through the loan and the buyer will have to come up with cash to make up the shortfall. If the buyer has cash on hand and agrees to go ahead with the deal, there’s no problem. But low appraisals can sometimes open up another round of negotiations, and the buyer can ask the seller to lower their price, or even request the seller put up enough cash to split the difference between the contract value and the appraised value.