Appraisals – Part 2
What happens when you’re a Buyer or Seller and the sale is contingent on an appraisal? If there is a loan involved, the lender will “order” the appraisal. The appraiser will typically contact the listing agent to set a time to come view the property. The appraiser will take detailed notes and photos so depending on the size of the property, it can take anywhere between 30 minutes to 2 hours or more. An average 2000 square foot home will typically take less than an hour.
In most cases, Buyers are not present for the appraisal. It is typically acceptable for a Seller to be present but not necessary. It is a great practice to provide a list of upgrades, including specific materials used, particularly if a major renovation has been done, very expensive or unique materials were used, or if the property itself is very unique – especially as it compares to other properties nearby that may be used as comparisons. Sellers ask if they need to have the property in “show-ready” condition for an appraisal. I always feel like it is a good idea. Appraisers are human and though they are looking at the property itself, not necessarily the cleanliness of it, condition is taken into consideration. If the property is a complete disaster, it could have a negative effect on the appraiser’s perception.
It can take several days to a week or more to get the appraiser’s findings and value. If you are the Buyer, you have a right to the full report and the value. If you are the Seller, you will typically not be provided any information other than the fact that the appraised value was at least the purchase price – unless it wasn’t. If the appraised value comes back lower than the purchase price, the Seller will typically be informed of the value. There are several options if this happens.
- The purchase price can be lowered to the appraised value.
- The Buyer can pay the difference between the appraised value and the purchase price (this will need to be paid in cash).
- The Buyer and Seller can split the difference.
- The appraisal can be challenged and perhaps the appraisal will assign a new value based on new information.
- The contract can be terminated.
Depending on the type of loan, the appraiser can also require certain repairs to be performed prior to closing. If this is the case, the appraiser will come back out to the property to inspect prior to closing and make sure that the repairs have been performed.
Lastly, appraisals are a great reason to price your home correctly from the start. You may get a Buyer who will pay more, but it may all fall apart during the appraisal process and cause you much more time, energy, and possibly money later.
Michelle Froedge is a residential Realtor and Principal Broker in the Greater Nashville and Williamson County areas of Tennessee. “Mom” to four-legged fur baby, Tyler, Auntie to Zelamie, she is a vegetarian and sings in her spare time. Michelle has lived in Nashville and Franklin since 1997 and has been selling homes since 2004.