When you write up a purchase agreement to buy a house, you should include a contingency that states that the house must appraise for the selling price. If you do this, you can have legal grounds for backing out of the deal if the house doesn't appraise high enough. As you prepare to get the house appraised, here are several things you should know about the effects the appraisal can have on the deal.
The appraisal is based on the current market
The first thing you should know is that you will need an appraisal shortly after the seller accepts your offer, and this appraisal will tell you how much the house is worth right now. Appraisers are very good at considering current market conditions when they perform appraisals, and the main way they do this is by looking at the selling prices of other homes in your area. By comparing the selling prices of similar homes, they are able to come up with a realistic value of the house you are buying.
The appraisal can affect your down payment
The second thing to know is that if your down payment is based on a certain percentage of the selling price, this could change based on the appraisal amount. For example, if you are required to put 20% down on the house you are buying, you might end up needing to put down more money than you expected.
If, for example, you planned on buying the house for $200,000, you would be planning on putting $40,000 down. If the house appraises for only $180,000, the bank will only loan you 80% of this amount, which would be $144,000. This means that you would have to put $56,000 down if you still wanted to buy the house for the full $200,000.
The appraisal can blow the whole deal
As already mentioned, you can back out of the deal if the house does not appraise for a high enough value, as long as you included that in the offer as a contingency. While you could still buy the house for the full amount, buying a house for an amount that is higher than the appraisal might not be the best idea. In this case, you may want to talk to the seller about lowering the price.
If you are buying a house right now and have questions about the process or about the appraisal, contact a real estate agent or real estate appraiser today.Share
26 April 2018
I have always been someone who is passionate about making the world around me more beautiful, which is probably why I was drawn to real estate initially. I really wanted to create a place where me and my family could spend a lot of time together in a peaceful, relaxing place, so I started looking for places in my area that were fit for the job. Within a few months, I was able to find an incredible property that was within my price range, so I purchased it as soon as possible. This blog is all about choosing beautiful real estate.