Property Appraisals: Why Your Offer Over Asking Price Won’t Always Seal The Deal
You’ve found the home of your dreams, beat out multiple offers and scored the seller’s highly coveted acceptance. What could possibly go wrong? If you are financing the purchase of your new home, your lender will send out an independent third party, not of their choosing, to conduct a property appraisal. The purpose of the appraisal is for the lender to find out whether they are making a good investment in your real estate investment.
Competition for property in a market with low inventory is commonplace in New England. Many properties are selling over the asking price which, in theory, should be an accurate property valuation. As a professional in the real estate industry, I hear stories all the time of properties selling for $100,000.00 or more over the price that the seller was originally asking for.
With property appraisals, past is precedence. In determining property value, an appraiser is going to look at comparable properties in the area and what they have sold for in the past. When prices are quickly on the rise due to a hot market the appraisals are naturally going to lag behind the times.
An appraisal below the agreed upon purchase price may open up negotiations for a lower price with the seller. Another potential resolution when faced with a low appraisal is terminating the deal pursuant to the mortgage contingency clause, as long as you still have one!
Posted In: Real Estate