Appraisals: What They Are, Why They Matter, and How it Affects Your Home Sale.

What Exactly Is an Appraisal, Anyway?

An appraisal is an objective, professional opinion of the home's value. It's conducted by a licensed appraiser who takes a good, hard look at your property, comparing it to similar homes that have recently sold in your neighborhood. They consider things like square footage, number of bedrooms/bathrooms, upgrades, and much more. Appraisers don't generally look for hidden defects like an inspector: While an appraiser notes visible issues that impact value (like a leaky roof or significant structural damage), their job is not a home inspection. They won't look behind walls, check every outlet, or test every appliance for functionality. A home inspection is still crucial for uncovering potential problems.

Now, here's the twist that might surprise you: the appraiser works for your lender, not you! I know, right? It might seem counterintuitive since it's your house being appraised. But think about it this way: the lender wants to make sure the amount they're lending the buyer isn't more than what the house is actually worth. It's like a built-in safety net, ensuring a fair transaction for everyone involved.  

So, What Happens If the Appraisal Comes In Low?

This is often the biggest fear, and it's a valid one. What if the appraiser says your home is worth less than the price you and the buyer agreed upon? Okay, deep breaths, sellers! don’t panic but be realistic It's definitely not the end of the world, and it happens more often than you might think. A low appraisal doesn't necessarily mean your sale is dead in the water.

Here are a few common scenarios and what they might mean:

• The Buyer Makes Up the Difference: If the buyer really, really wants your house and they have the cash, they might be willing to pay the difference between the appraised value and the agreed-upon sale price out of their own pocket.
• You Negotiate a New Price: This is often the most common outcome. You and the buyer might go back to the negotiating table and agree on a new sale price that's closer to the appraised value. It might sting a little, but a slightly lower price is better than no sale at all, right?
• You Challenge the Appraisal: While not always successful, if you genuinely believe the appraisal missed some crucial comparable sales or didn't account for significant upgrades you made, your agent can help you try to challenge it. It's a long shot, but sometimes it works!
• The Deal Falls Through: This is the least desirable outcome, but it can happen. If neither side can agree on a new price or the buyer can't (or won't) make up the difference, the deal might unfortunately fall apart.

The key here is communication and flexibility. Work closely with your real estate agent, who has likely navigated low appraisal situations before. They'll be your best advocate and guide you through the next steps.

Here is The Big Takeaway

Appraisals are a crucial part of the home selling process, ensuring fairness and protecting all parties involved. By understanding what an appraisal is, who it serves, and what your options are if it comes in low, you'll be much better equipped to navigate your home sale with confidence. 

Have you ever experienced a low appraisal as a seller or a buyer? What happened? Share your stories and tips in the comments below! I'd love to hear from you.