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When an appraiser determines a property’s value to be less than the pre-approved loan amount then most buyers will have an appraisal contingency, so they can go back and get a serious money back.
An appraisal is an unbiased professional opinion on the value of a home and is used whenever a mortgage involves the purchase, refinance, or sale of that property.
A qualified appraiser generates a report based on direct inspection, using recent sales of similar properties, current market trends, and aspects of the home (e.g.: amenities, floor plans, square footage, etc.) square feet) to determine the assessed value of the property. Borrowers typically pay due diligence fees, which can run up to several hundred dollars.
When the appraised value is lower than expected, the transaction may be delayed or even canceled. Almost all mortgage applications require the lender to appraise the home as part of the underwriting process. Ideally, the lender wants to see the appraised value equal to or greater than the price agreed upon by the buyer and seller, but sometimes the appraised price is lower. In these situations, the buyer and seller must come to a mutually beneficial solution to ensure the transaction goes through.
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