Step 15: The Appraisal

Congratulations! If you’ve gotten this far it means you’re under contract and have dropped off your first earnest money check. Now it’s time for the appraisal.

Who orders the appraisal? Your mortgage lender is the person who orders the appraisal. Generally, the cost is somewhere between $350–$500 and is considered part of your closing costs, unless the bank requires you to pay it upfront.

A few tips about the appraisal:

• You do not need to attend.
• The buyer’s Realtor does not attend either. Only the seller’s Realtor attends.
• Once ordered (or after you pay) the appraisal, it generally takes about a week before the appraiser comes out to conduct the appraisal. After that, it usually takes another week or so for the report to be written. Expect it to take about 2 weeks from when you pay for the appraisal until you receive the report.  
• Once the report is written, it’s given to your mortgage lender. Your mortgage lender will then forward it to you and let you know whether the property appraised at the purchase price, below the purchase price, or above the purchase price & if any repairs are required. Once you receive the appraisal report, please forward a copy to me.
• If the property is appraised at the purchase price, nothing further needs to be done and the closing process will proceed forward as planned.
• If the property appraised for more than the purchase price, congratulations! That means we got you a great deal and you’ll have instant equity in your home on the day you move in!
• If the property is appraised for less than the purchase price, we have options to discuss. That means the bank will only give you a loan for the appraised value. In this case, we then go back and renegotiate the purchase price with the sellers, ideally to the appraisal price. If they don’t come down to the appraisal price, you can either walk away and get your earnest money back or bring the additional funds to closing. For instance, if the purchase price is $500K, but the appraisal only came in at $475K and the sellers won’t go any lower than $480K you have to decide if you’re going to bring an extra $5K on top of your down payment and closing costs to closing or walk away from the deal. 

You may be wondering “What is an appraisal anyway and when does it occur?”

If you are, you aren’t alone. We get asked this question all the time after we’ve made an offer on a house, had the inspection done, and now appraisal is being ordered. The rest of the process including the appraisal, underwriting, and title is a bit fuzzy to most people. In addition, you might be wondering:

1. Does the buyer or the seller pay for the appraisal?
2. Who hires the appraiser?
3. Who performs the appraisal?
4. Who pays for the appraiser?
5. How much does an appraisal cost?
6. What happens if the appraisal comes in lower than the purchase price of the home?

These are all great questions! 

So what do you do if you’re the buyer paying $400,000 for a home, but the appraisal only comes in at $350,000? This article does a great job of explaining what your options are in that situation.

But what happens if you’re the buyer paying $400,000 for a home and the appraisal value comes in right at the purchase amount price? Is this a good or bad thing? This is definitely a good thing as it means the bank will give you a loan for the full amount of the purchase price.

But what happens when an appraisal comes in high (where the appraisal amount is over the purchase price) and does this happen very often? No, it’s very rare for an appraisal to come in over the purchase price as the bank just needs to know that the property is worth the purchase price so they feel comfortable giving you a loan. Therefore, it’s not common for an appraisal to come in over the purchase price. When it does, buyers are often very happy as, essentially, you now have instant equity as we got you a great deal!

Still, have a question? Reach out to us anytime.