In today’s segment I’m going to discuss appraisals and appraisal contingencies and why that’s important to you when purchasing your next home. Ask any REALTOR in California about the Real Estate Market and they’ll tell you how hot it is. Especially in the Bay Area, where I live, there’s a lot of competition among Buyers in order to get a home that many people are offering a considerable amount over the list price. If you’re paying cash, that’s OK. But if you’re getting financed, the home will need to be appraised before the underwriter will fund the loan.
Once you get into contract, your Lender will order an appraisal and usually the appraiser will contact the Listing Agent to set up an appointment. They will verify the square footage of both the lot and the home, review any updates that have been made to the home, and also compare the property to homes that have recently sold in that neighborhood.
If the home appraises for what you offered, then the Lender will continue the process to underwrite the loan and you will be able to the Appraisal Contingency as stated in the contract.
If the home does not appraise for what you offered (this is important), the Buyer has three options:
You can make up the difference yourself by adding money to the down payment, or you can roll that money into your loan depending on your credit. You will have to talk to your Lender about this option.
You can renegotiate the price of the home with the Seller.
If all else fails, you can cancel the contract.
So, the next time you put an offer in on a home, make sure that you work with your Lender and your REALTOR to understand your options if the home doesn’t appraise.
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