Submitting an offer on a home and having the appraisal come back low can be heartbreaking and confusing.
If you are paying for the home with a mortgage, a low appraisal could cause the entire deal to fall apart because your lender will no longer be willing to give you more than what the determined value is.
There are many reasons that this situation can arise and we are sharing them with you today to cut down on the confusion and help you protect yourself from it happening to you.
The Purpose And Value Of Home Appraisals
The primary purpose of a home appraisal is to ensure that the property being financed is not worth less than the selling price. This is a standard practice in the lending industry. It is a logical move for all parties involved and is the only way to make sure that a buyer does not purchase a home for more than its actual value.
The Local Real Estate Market Is Red Hot
Appraisals use information from similar sales in the area of the house in question. When the market is red hot, the information about comparable sales is not currently available to appraisers. This can lead to a property being valued less than the actual market value.
There Is A Shortage Of Appraisers
When the demand is high for home appraisals, there can be a shortage of appraisers to complete the work. When this happens, appraisers often take on large caseloads and often become overwhelmed by the volume of work to be completed. This can lead to quickly completed appraisals that are not researched or completed well.
Inexperience with a specific property type or inexperience in a particular market can lead to a lower appraisal. When searching for an appraisal company, you will want to look for one that has local ties and is familiar with the type of property you are having appraised.
Sometimes homeowners just simply have too high of expectations on the value of their home. They think that some of their amenities are more valuable than they are, or they base their estimates off of Internet research they conducted. A professional appraiser will use local information as well as their expertise to come up with an accurate appraisal.
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