The Appraisal
If the buyer is using a mortgage to buy your home, then the lender will require that an appraisal be conducted. So what is an appraisal? Read this blog post to find out!
You do not need to do anything for the appraisal.The buyer’s mortgage lender orders the appraisal, and the buyer pays for it. The appraisal will be scheduled during normal business hours and will last about 30 minutes. It is best practice that you are not present during appraisal. The appraiser will use the lockbox for access.
Once the report is written and delivered (before or on the Appraisal Objection Deadline), the buyer’s mortgage lender forwards it to the buyer to let the buyer know whether the property appraised at the purchase price, below the purchase price, or above the purchase price. You will only find out if the appraisal comes back low.
If the property appraised at or above the purchase price, nothing further needs to be done and the closing process will proceed forward as planned. If the property appraised for less than the purchase price, we have to address that issue, as the bank will only give the buyer a loan for the appraised value. In this case, the buyer will often come back to us and ask to renegotiate the purchase price down to the appraisal price unless they provided appraisal gap language within the contract. If the buyer provided appraisal gap language in the contract, then the buyer has to come up with cash at closing for the difference between the appraisal price and the purchase price. The appraisal gap may not cover the full difference. For instance, if the purchase price is $500,000, but the appraisal came in at $475,000 and the appraisal gap waiver in the contract is only $20,000, we will either have to agree to lower the price to $480,000, or the buyer has to agree to bring the extra $5,000 to closing (on top of the down payment, $20,000 appraisal gap and closing costs) or walk away from the deal. If the buyer walks away, their earnest money is usually refunded in the case of a low appraisal.
Questions about Colorado real estate? Reach out to the Appreciate Realty CO agent you are working with directly or call us at (303) 956-4948 or email us at hello@appreciaterealtyco.com