After the inspection contingency is resolved, we will call your lender and tell them to now order the Appraisal. An appraisal is the bank sending out their trusted 3rd party to verify the house is worth what they are lending you. We wait until the inspection resolution is completed to avoid spending $300 -$400 on this until we know you still want to buy the property.
In many cases if the appraisers report says the property is not worth what you are paying, you will have the opportunity to rescind your offer. We have found that appraisals are an art not a science. It will prove helpful to ask your Realtor what the current regulations are surrounding appraisals.
There are currently a lot of changes and regulations going on with the Appraisal market. Many big banks are bound by a new regulation called HVCC which requires them to blindly choose an appraiser from a pool of over 200 of them, based on which charges the least. There is some conversation that the banks are encouraging the appraisers to come in with lower appraisal amounts.
Some lenders have figured out a way to use their own appraisers, or at least choose the appraiser from a pool of 3-4 of them. This way the lender can make sure they hire an appraiser who is being paid well for their work to avoid any rushing through it, and also an appraiser who is very familiar with the area of the subject property.
We always say that an “appraisal is an art not a science” We can come up with a fairly large range of value for almost any property, based on different methods, our price per square foot method, are comparable adjustments method, and all of them have to pass the reasonableness test. Its important that you use a Realtor like the agents at Hermann London, to make sure you price your property properly, and avoid any problems when it comes time for appraisal.
Many sellers prefer to base the price of their home on the amount they paid for it, the amount they always hoped to make on selling the property, the amount they owe on it even if they took out a second loan to buy a boat or pay for college, or based upon what houses in their neighborhood sold for a few years ago. It’s more important to price your property properly based on market value if you want to actually get the highest price. Price your property properly at first because this is when the majority of truly interested buyers will be coming to your home.