Homes For Sale Charleston SC Tips: Low Appraisal
A very important part of the home buying process is the appraisal. All lenders require an appraisal, which is a report done by a trained professional to determine the fair market value of a home. Lenders require this because they want to ensure that the house is worth the amount that they are lending.
So what happens when the appraisal comes back at a price different from the purchase price agreed to in the contract?
To make this a little easier to explain, let’s say Joe and Mary have agreed to by Mr. Anderson’s house for $165,000.
Well, if the appraised comes back at $170,00, all is ok. In fact, this is very beneficial to the buyer because this means that they will be moving into their new home with some equity (the house is worth more than you paid for it = $5,000).
A common question among first time buyers of homes for sale Charleston SC is what happens if the appraised value is higher than the contract price (the agreed upon purchase price)?
They wonder if the seller can demand more money from the buyer? In our example, could Mr. Anderson demand that Joe and Mary pay $170,000 or else the deal is off? The answer is NO. Once you have a contract, both buyer and seller must abide by the terms of the contract. In other words, the price ($165,000) is locked in.
Another common question is what if the appraised value comes back lower than the contract price? What happens then?
Say the appraisal in our example came back at $160,000. At this point, it is necessary to renegotiate the price. Simply put, Mr. Anderson can’t sell a house worth $160,000 for $165,000. No bank in the world will give you a loan for more than what a home is worth, and if someone had that much cash they surely wouldn’t offer more than it is worth. (Think of it this way–if you went to go buy a new tv, and the price was listed at $600, would you happily offer $700 instead?)
But the thought of this possibility causes anxiety for many first time buyers, but it shouldn’t. It is unlikely that Mr. Anderson would refuse to renegotiate– for one thing, he already has a buyer already in place. Why go through the whole process again with someone else, just to end up back where he is now?
Usually, it simply requires typing up a simple, one page Price Change Addendum reducing the purchase price to the appraised value. But this can also benefit the buyer in the sense that you got the house you wanted, but paid less for it.
One important thing to keep in mind is that the appraisal is usually done towards the end of the process, usually within a few weeks of the closing. At this point you have performed inspections, and repairs are either completed or in the process of being completed. The lender is getting closer to final approval, and the closing day is in sight. Killing the deal at this point would lead to more wasted time and money lost for the seller.
There are some possible negative scenarios that could happen, but they are highly unlikely. There are some things you may have to reconsider if you have to renegotiate–for instance, Mr. Anderson may have been willing to purchase Joe and Mary a home warranty in the original contract, but after the low appraisal (and subsequent reduction in the sale price), he may no longer be so eager to spend that extra $400-$500.
This is why it is so important that if you are searching homes for sale Charleston SC you work with not just a Realtor, but the right Realtor. Especially for first time home buyers. The right agent will fully explain the process to you so you understand how the process works, as well as the potential pitfalls.
When you get into a situation such as the appraisal coming back lower than the purchase price, you do not want to realize at that point that you hired the wrong agent.
For more helpful information about homes for sale Charleston SC, visit my website. If you have any questions about the appraisal, simply leave a comment, I love to help!!