A professional appraiser conducts a house appraisal to give an estimated market value of your house or property. A house appraisal is usually done at the request of a lender. This is done after the lender considers your application for a new or refinanced mortgage. In some cases, the appraisals come in low owing to the declining values in the neighbourhood.
Another major reason for a low appraisal is the house being in need of improvements. A lower house appraisal can jeopardize a potential sale. This is because the lender would not agree to finance the full amount for closing the deal.
The importance of house appraisals
Mortgage lenders need to make sure that they do not approve a loan more than what a property is worth. House appraisals help the lenders in this regard. A house appraisal also protects the buyer from paying more for a property. The buyer can find out the current value of the property he or she wishes to purchase.
Besides, the buyer can determine the amount they can reasonably spend on the house. In certain situations, it becomes extremely necessary for homeowners to seek a house appraisal. They include refinancing their mortgage or getting a home equity line of credit or a home equity loan.
Why avoid a low house appraisal?
One of the major problems with a low house appraisal is that it can delay the sale of your home. Once you have started the process of buying another house, this can put you in a terrible situation. This can be even worse when you are moving because of a divorce or a job.
You may not be able to sell your house at the intended price owing to a low house appraisal. The property may end up being on the market for a considerably longer period. This can keep the buyers away as they think there’s a problem with the house.
Chances of a house appraisal coming in low
Low house appraisals do not occur quite often. The chances of a house appraisal coming in low are less than 8% most of the time. You always have the option of renegotiating a low appraisal after an appeal. The occurrence of low house appraisals also depends on market conditions and the neighbourhood.
Most of the appraisals come in at the right value. The ones that come in low are often a result of other properties in the neighbourhood not being upgraded.
Steps to avoid a low house appraisal
It would be a good idea to know about the upgrades that your house needs. An experienced real estate agent would help you in this regard. The agent can point out the upgrades that may be necessary for getting a good appraisal.
Once the improvements are done, keep the receipts safe. They can be used to show the appraiser that all the necessary upgrades have been completed. You must try to get an appraiser who is familiar with your neighbourhood.
The appraisal can be challenged by the sellers and additional comparatives can be provided for consideration. In case of a low house appraisal, the buyer can also pay for the difference in cash. A lender may provide a loan even if the appraisal is low.