We put our home up for sale and had a buyer within two weeks with a price close to what we were asking. About four weeks later, we found that, because the appraisal came in lower than the purchase price, the buyers were not interested in paying what they said they would pay on the contract. How can someone sign a contract agreeing to a certain amount and then change their mind?
Most home buyers are purchasing with a mortgage because they don’t have the money to buy without borrowing from the bank. If this is the case, the contract will be contingent on a mortgage which means, if your buyers are not able to get the mortgage, they are not able to buy your home.
Part of the mortgage process is an appraisal, a value given to your home by a licensed appraiser. He makes an appointment to come by your house, measures, evaluates and finds other properties similar which have sold in the last year. His report places a value on your home which the bank uses to determine what they will lend you. If that value is less than what you agreed to pay for the house, your buyers have the right to offer less or purchase elsewhere.
As the seller, you can hold to your price and hope the buyers see the value and have money to pay the difference. However, if you do this, you risk losing your buyers which means you’re back to square one with showings, hoping for another buyer. And, unless higher valued homes are scheduled to settle in the near future, this scenario may be repeated.
In this market of lower values, appraisals can get in the way of contracts, especially if homes which have sold in your area are not of the quality or location of yours. A good agent will guide you through the process, working hard to bring you the most value for your property with the least headaches. Then, before you know it, you will be packing and moving on, with the appraisal issue only a faint memory.