When you make an offer on a property, both you and your real estate agent should have a solid idea of what the appraised value will be.
If you’re surprised by the value the appraisal assigns to the house, your next steps will depend on whether the appraisal was high or low.
If the value from the appraiser comes back higher than what you agreed to pay for the property, then there would be no issue for you. Congrats! You have immediate equity.
However, if the value comes back lower than the agreed upon price, a few issues will come up. The first is a question as to whether the value that came back is correct.
Recent sales of similar homes in the area could drive down the value if they are lower than your contract price. You and your real estate agent can ask for a review of the appraisal through the appraisal management company who sent the appraiser.
You may also order a new appraisal with a different management company and appraiser, if your lender will allow it. In this case, you would have to pay for the second appraisal as well as for the first.
Since the lender will only lend money based on the lower value of the two (appraisal or contract price), one of two things must happen if the value remains low. Either the sale price must come down, or you must cover the difference between the appraised value and the sale price.
If the seller is unable or unwilling to lower the price, then you would either come up with the difference or move on to another property.
Would you like more information about this process? Feel free to contact me with any questions you may have.
Every real estate contract should include wording that gives you the opportunity to conduct a home inspection. The time period for this allowance is typically five business days from the day the seller accepts the offer.
If this verbiage isn’t included, you have little protection or recourse if you discover the home needs significantly more work than you thought.
This is why you need to have a home buying team that includes both a real estate agent and an attorney who specializes in real estate transactions. These experienced professionals will ensure all your documents include appropriate stipulations to protect your interests.
When you complete a home inspection, you will review the items on the report with your attorney. At this point, you must decide which items are important to you. Keep in mind that older homes usually have items that are in need of repair or replacement. This is expected.
Once you’ve decided which issues are important to you, your attorney will let the seller know what the inspection turned up and which of those items you would like addressed. Keep this list as short as it needs to be to cover the big points. Going to the seller with a laundry list of items may make them less likely to want to work with you.
The level of interest in the property will also be a factor in how willing the sellers are to negotiate these items with you. If the sellers have multiple offers and need to move the property quickly, they may be less inclined to make concessions than if the property has been sitting for months with little or no interest.
The good news for you is that if you are unable to come to a satisfactory agreement with the seller, you are able to get your deposit back and move on to another property (provided this contingency was worded appropriately in your contract).
If you need a recommendation for a real estate agent or attorney who can help you with these issues, I can provide a list of reliable professionals. Just give me a call.