So what happens next?ĭon’t despair - not yet. If you and the seller agreed on $200,000, for example, but the appraisal is $190,000, that creates a $10,000 shortfall. If the appraisal is lower than what you’ve agreed to pay for the home: Your lender won’t give you a loan for more than the appraised value.If the appraiser says it’s worth $250,000 - jackpot. How, you ask? Let’s say, for example, you’re paying $200,000 for the house. If the appraiser’s valuation is higher than what you’re paying for the home: Congratulations! You’ve gained immediate equity.Great news: This is the final step in your loan-getting process! If the appraiser’s valuation matches the price you and the seller agreed to for the home: Your lender will proceed to underwrite your loan.You and your lender will both receive a copy of the report.
The report will outline their methodology and also include photographs they’ve taken of the property, inside and out. To produce the report, they use their analysis of the property and data from comparable homes, as well as review the purchase offer. When the appraisal is finished, the appraiser issues a written report with their opinion of the value of the home. Here’s What a Valuation Means - and What to Do Next That's an assessment of the property’s value by an unbiased third party: the appraiser. A Home Appraiser Is Neutral (Like Switzerland)Īfter you sign a home purchase agreement (the contract between you and the seller about the terms of the pending sale), and before your lender approves your loan, the home you’re buying must pass an appraisal. (Even harsher, but also true.)įor that reason, a home must be valued at, or above, the agreed-upon purchase price, and this has to happen before you can close on a house. (Harsh, but true.) If someday, for some reason, you can’t make your mortgage payments, the lender can foreclose on the home and sell it to recoup all or some of its costs. Their only concern is that the house you buy is worth as much as the value of your mortgage. Your lender doesn’t care about the freestanding tub. Or that two-tiered deck just made for parties. Maybe it’s the bathroom that feels like a dreamy, modern spa. Most people have deeply personal reasons for wanting to buy a home.
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