To some, it may seem like once the contract is signed the transaction is complete and just a few items remain before closing. However, before the closing, the appraisal may cause complications. Depending on the market conditions in your neighborhood and the comparable homes for sale, your realtor will advise you on an appropriate list price to ensure your home sells, however an appraisal is based on other considerations. A reputable realtor will make sure that your list price will be in synch with the appraised price so as not to complicate the closing. If an appraised price comes in with a difference you may find yourself with a cancelled contract.
According to the National Association of Realtors, 21% of members experienced a delay in contracts and 33% experienced a cancellation of contracts. Many of these result from lenders mortgages applications being denied, and low appraisals. From the standpoint of a lender, it is not practical to underwrite a mortgage for more than a home is worth so they will not be left holding the note if a borrower defaults. A lender arrives at an amount based on either the sale price or the appraised value. The home is assessed yearly for tax purposes and the appraised price of your home annually is based on comparable homes. In general, in the current market, homes are appraised for less than what sellers are asking, however with inventory decreasing, list prices up the appraisals may come in less. If you are looking to sell your home and would like an honest evaluation of appraisal and a realtor perspective, contact a member of Beachfront Realty today!