Over the last few years, several changes have been made in the real estate appraisal process. These changes have had an impact on the buying and selling processes, and we wanted to go over them in further detail today.
An appraisal is an independent third-party report of a home’s value. The appraiser wants to ensure that the collateral that secures the mortgage (the home) is enough to cover the loan. Banks and lenders are risk-averse in nature, so they want to make sure the current market value of a home is in line with the amount being borrowed.
What has changed recently is how appraisals are conducted, how much they cost, and the time frame it takes to complete them. Lenders now order appraisals through a blind bid system and they don’t have much influence on how long it takes for appraisals to b assigned.
Some lenders have established pre-negotiated rush fees to speed things along. I like these lenders because they usually don’t miss closing dates, which is good news for all parties involved.
However, appraisal costs have risen because of this. An appraisal that used to cost $399 can cost over $1,000 and have rush fees as high as $1,500. In the past, lenders waited to order an appraisal. However now, that the process taking up to six weeks now, they are ordering them immediately after the contract is accepted in order to avoid delays.
In the purchase contract, there are three deadlines around the appraisal process. The first is when the appraisal needs to be completed. The second is when the buyers can object to the appraisal if it comes in lower than the purchase price. Finally, the third deadline is the appraisal resolution deadline, where the buyer and seller need to come to an agreement on solving a low appraisal.
With a low appraisal, the buyer might have to increase their down payment or the seller might have to lower the sale price. Most often, it’s a combination of the two. Remember, appraisals must be disclosed to any other buyers that come along. Simply coming back on the market might not be the best option if that happens.
If you have any questions for us about appraisals, don’t hesitate to ask. We would love to hear from you and look forward to answering them.
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