If you’re buying a house in Scottsdale, one of the most important steps is the appraisal, which involves figuring out just how much the home is worth. You will need to get this done before you sign the contract, since it will affect financing for the home. In a perfect world, the appraisal comes in right around what you – and your lender – thought it would be. But in many cases, it comes in either high or low. Be prepared for either case by finding out what your options are for each situation.
When the appraised value is higher than you thought…
In most cases, the appraisal coming back above the assumed property value won’t change much. It just means you got a great deal on your new house in Scottsdale, and you have equity before you even move in. Fortunately for you, it doesn’t mean that the seller can increase the price, though. In fact, the seller might not even be aware of the higher appraisal, since sellers are usually only notified of the appraisal result when it comes in lower than expected.
When the appraised value is lower than you thought…
This situation is a bit more complicated, and the results affect both buyers and sellers. The first thing you should know is that if the appraisal ends up being lower than expected, you likely won’t get the amount you were hoping for from your lender.
For example, if you planned to buy a $300,000 house and pay a 20% down payment – or $60,000 – you could expect a mortgage worth $240,000 from the bank. If the bank finds out the house you’re buying is only worth $290,000, your loan will be short $10,000 because the bank does not want to lend you more than the house is worth. So now you’ll only be getting $230,000 from the bank. What does that mean for your home purchase?
Well, you could cover that $10,000 yourself, if you have the funds. This is often the simplest option for buying a house after the appraisal comes in low. If you don’t have all the money on-hand, but you have some of it, you can try negotiating with the seller. He or she might be willing to reduce the home price by $10,000, or even just $5,000 if you can pay the rest.
Of course, if there are other offers available to the seller, he or she is less likely to negotiate with you. If this is the case, you can try to appeal the appraisal. This requires you to work with your Realtor and your lender to explain to the appraiser why you want a second opinion on the appraisal of the home. But if you can get it, you have a chance of finding out that the home’s value is closer to what you originally thought, allowing you to get the full amount of the loan.
And if none of this works, you likely have the option to cancel the sale altogether, assuming there is an appraisal contingency in your contract. This is usually part of the financing contingency, since you probably won’t get the financing you need if the appraisal comes in low. So chances are that you can walk away from the house if nothing else works, at which point you can continue your search for your dream home in Scottsdale!
Realtor | Founder
The Matheson Team – RE/MAX Fine Properties
21000 N. Pima Rd., #100, Scottsdale, AZ 85255