Home Appraisal 101 for Buyers

A home appraisal happens after a home goes “under contract”. A licensed appraiser inspects the home to assess its worth. This happens because, occasionally, a home’s listed price is not its true worth. Typically, if you are financing your home purchase, your lender will take care of coordinating the appraisal. Lender’s want to ensure they are not over-lending. So depending on the appraiser’s report, they may require their buyer to include an appraisal contingency in the offer. 

In the event the home you want to make an offer on got appraised at a lower price than the price you offered, there’s a few things that you can do: 

• Renegotiate - You can ask the seller to lower the price. When markets are competitive, this is unlikely, as they may already have multiple other offers who are willing to engage in a bidding war. 

• Make up the difference in cash - If your lender is unwilling to raise your loan above the appraised value, you can make up the difference by increasing your down payment. 

• Back out - If you included an appraisal contingency in your offer, the seller is unwilling to lower the price, and you cannot pay the difference in cash, you may back out of the deal. Keep in mind that when there is an appraisal contingency, you can recover your earnest money deposit as long as you’ve met the deadlines laid out in your offer.