What's an appraisal and why do I care? We already have a contract with an agreed price on my Miami home.
Hi, I'm Heather Waldron with Global Luxury Realty, and when a home is purchased with financing, appraisals are super important. Banks use appraisals to mitigate their lending risk. They will only lend off of the contract price or the appraisal price, whichever is lower.
If your appraisal price comes in at the contract price or higher, that is great news. Everything will move forward smoothly.
However, if the appraisal price comes in lower than the contract price, now there's a gap in funds and an obstacle to close.
What are your options? Well, the seller can lower the price to the appraisal price. The buyer can make up the difference with their own funds between the appraisal price and the contract price. Or they can meet somewhere in the middle when the seller gives a little, and the buyer gives a little.
The last option, which isn't really good for anybody, is to cancel the contract. And that means both buyer and seller have to start over, and that they just both wasted a lot of time and money.
Now, If you did have an appraisal and it came in low, hopefully you were prepared for that from looking at the home's value up front. So sellers, if you think there maybe an appraisal problem with any contract you have, try and get the buyers to remove any appraisal contingency and then make sure they do have the funds to make up that gap.
I hope you found this informative. Give me a call if you have any real estate questions, or if you are looking to buy or sell a home in Miami. Make it a great day.