For most people, a home purchase is the single biggest investment that they will make in their lifetime. With this said, the majority of home buyers will be obtaining a mortgage in order to purchase the property. If this is the case, then the lender will typically order an appraisal as part of the financing contingency. An appraiser will observe the subject property, analyze the data from recent comparable sales, and provide their findings to their client (the lending bank/institution). Although the lender is technically the owner of the appraisal, the home buyer still has the following rights:
- The home buyer has the right to know what type of valuation service is being ordered for your loan.
- The home buyer has a right to make an appraisal a contingency in the sales agreement.
What about cash buyers?
Although cash buyers are certainly not obligated to order an appraisal, they certainly may do so if they wish. As a matter of fact, this may be a good idea in order to have more confidence in the investment. After all, an appraiser is considered to be an independent, impartial, and objective professional in the real estate transaction.
Of course, the current environment is a seller’s market. Therefore, it is possible that a cash buyer could order an appraisal that comes in lower than the contract price and the seller does not budge on the selling price. Typically, this appraisal would need to be conducted during the inspection period or other previously agreed upon time frame between the buyer and seller. In the case where the appraisal comes in lower than the contract price and the seller stands firm, it is possible that the deal gets cancelled and the seller lists the property again.
Summary
In a dynamic real estate market such as the current environment, appraisals can be quite erratic. For sellers, it is often considered to be one of the last hurdles that needs to be cleared prior to a successful closing. With prices rising and bidding wars taking place in many circumstances, it is quite possible that appraisals may come in lower than an agreed upon contract price. In these situations, both buyers and sellers may have difficult decisions to make. For buyers, they may have to go back to the drawing board to find another house in a challenging market. For sellers, they may have to list their property again only to encounter similar appraisal challenges in the future. In these situations, it is oftentimes beneficial for the buyers and sellers to negotiate an agreement on price. For buyers with a tight budget, this may even mean that a family member supplies a financial gift to bridge the gap.
In closing, every real estate market is different and has unique dynamics. If you are looking to buy or sell a home in South Florida, we can help. Call Live South Florida Realty, Inc. today for a free consultation.
