What’s an Appraisal and Why do I Need it?

We’re keeping it short and sweet today.

An appraisal is when the lender sends someone out to appraise the home (I’m telling you, real estate folk get an A+ for creativity. They keep knocking it out of the park), to make sure that the bank isn’t loaning more money than they need to and that the home is actually selling for what it’s worth.

They won’t just take our word for it, apparently.

Which I think is rude, but I digress 😉

When the appraisal comes back over asking, or worse yet for the seller UNDER asking, is when it’s a bit of a sticky wicket. Back a couple of years ago this is why the appraisal clause became so popular. Homes were regularly under contract for more than asking, and the buyer wanted to assure the seller (if they were the lucky buyer who even got picked in the first place), that regardless of how the appraisal came back, they would stick to the agreed upon purchase price in the contract.

An appraiser checks things like the location of the home, the general condition of the home, roof, lot size, number of bedrooms and bathrooms, etc. They run comps like we agents do, to make sure everything is square.

Appraisals are required for all government backed loans, which include your FHA, VA, and USDA. You may waive it with Cash or Conventional purchases. They usually cost around $300-$700 depending on the size of the house, and is typically paid by the buyer. They’re scheduled during your Due Diligence period along with the inspection, so that if anything comes back less that ideal, you have an opportunity to back out of the contract with no loss.

Speaking of inspections…