The Mortgage Appraisal
By Ed Westerman, Broker Country Lifestyle Realty, L.L.C. 417-844-2626
August 27, 2019
Appraisals can benefit both buyer and seller
Selling a home can be an anxious time. It is a time when the sellers will have increased traffic thru their home; that of realtors, prospects, a home inspector, and then another, the appraiser. If a mortgage is involved, the home appraisal is another critical component of selling or buying a home. It can be a source of confusion for the Seller as well as the Buyer.
The appraisal is required by the lender and the mortgage appraiser
is normally paid by the buyer as part of the mortgage process; however, it may be beneficial to the seller as well
as if they compare the appraised value to their selling price.
Soon after the home is under contract the seller will be notified that the appraisal will be done shortly. Not long before this there was the inspection which was paid for and conducted on behalf of the buyer. Inspections are a detailed and very time consuming report on the condition of the home. The appraiser, on the other hand, will look at your home from a completely different perspective; that of finding its fair market value for the mortgage company.
The appraiser will take loads of pictures and take measurements but focus only on the issues of value pertaining to the mortgage company requirements. The appraiser’s job is to determine the market value for the home. The mortgage company will then decide if the home fits their lending criteria, then in affect, they will approve or disapprove the loan which affects the purchase of the home.
When will the appraisal actually take place?
The mortgage company has the signed sale contract and has begun the approval process. Usually a couple a weeks after the signed contract is submitted to the mortgage company they will notify an appraiser to do the work. The appraiser will call the seller to set the appointment. This effort is sometimes coordinated thru the real estate agents involved.
The mortgage appraisal being completed what comes next?
There are several major events involved in buying and closing of a home purchase.
Mortgage Company Qualifies the Buyer–better done before shopping to buy
The offer to buy and agreement to sell –Contract signing
Loan approval for a specific home
The home inspection
The house appraisal
The loan closing date is set
The appraiser will submit the appraisal to the mortgage company. When the appraisal meets the lender requirements for the subject loan, both monetarily and property condition, then they can proceed with the loan. Their underwriting department will contact the buyer and decisions will be made for the next step in getting to closing.
The market value indicated by the appraiser affects the next steps in the sale/closing process. The mortgage company will provide a mortgage based on the appraiser determined value not the accepted sale price. The appraisal result is critical to getting to the closing table. The realtors and their clients will be anxiously waiting for the results. All will be relieved when the appraisal comes back sufficient to allow the lender to approve the loan.
What if the appraisal value is short: For example, if the sales contract price was $200,000 but the appraised market value was only $190,000 the buyer would be short $ 10,000 based on the signed sales contract. But the contract is conditional on the loan so the buyer may have to come up with the difference. The buyer can increase his cash contribution or the buyer may ask the seller to reduce the sale price. Often it is the willingness to negotiate this critical step that determines the fate of this sale/loan.
The home condition will be indicated by the appraiser:
Appraiser will indicate conditions that may affect the loan. Some loan types such as FHA, VA, and Others can be very strict on conditions such as paint. When there are problems they may require repairs and a compliance inspection as well.
The appraisal result is critical to getting to the closing table. The realtors and their clients will be anxiously waiting for the results. Of course, all will be relieved when the appraisal comes back sufficient to allow the title company to complete the closing documents and schedule the closing with all parties.
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