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Understanding the Appraisal

If you are financing your purchase, your lender will likely need to order an appraisal to determine the fair market value of the home. Your lender wants to make sure that the loan amount is in line with the actual value of the property in case of loan default.

This is why it is key to submit an offer within the range that the comps support. If you offer much more than the property is worth, you may not be able to secure financing.

To determine the value of the home, an appraiser will visit the property and review comparable sales in the area. Based on this, they will assign a value to the home.

If the appraisal comes in lower than the purchase price, you have a few options:

  • Pay the difference in cash
  • Renegotiate the contract price with the seller to the lower appraised price
  • Contest the appraisal
  • Restructure the loan with your lender
  • Cancel the contract (pursuant to your appraisal contingency)

In the event of a low appraisal, your real estate team (agent, lender & attorney) will work with you to determine the best course of action.

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