|Photo courtesy of [the nest]|
In order for a house to sell, all parties in the transaction must agree on at least one thing…THE PRICE!
First, there’s the sales price. Hopefully your Realtor helped you determine an appropriate price range to attract buyers and sell your home quickly at a price that’s fair to you.
If you are working with a cash buyer, the only other hurdle you must negotiate may be repairs or price adjustments for repairs.
But, if your buyers are like the majority of buyers and require a loan, then the home has to be “sold” one more time. This time to the lender.
The lender will hire an appraiser to perform a reasonable home valuation called an appraisal. The appraisal’s purpose is to ensure the lender they are lending money to purchase a home which could be reasonably resold for the same price if the borrowers. Unfortunately, people don’t always pay off their loans. (see: Foreclosure)
Hopefully you and your Realtor took the recent sales of other similar, or comparable, properties into consideration when arriving at your list price and accepted sales price, because this is exactly what the appraiser does.
If the appraised value of the home is determined to be in line with or higher than the agreed to sales price, all parties may proceed with the transaction.
However, if the appraised value of the home is determined to be less than the agreed to sales price, there are three options.
First, the lender may refuse to loan the money required to purchase the home.
Next, the lender may require the borrower to come up with additional funds to bridge the gap between the sales price and the appraised price.
Finally, the seller may reduce the sales price of the home to fall in line with the home’s appraised value.
This is just one more reason why it is so important to price your home correctly at the beginning of your listing.
Check out Fannie Mae‘s post on “Sales Price vs. Appraised (Market) Price” on their website, The Home Story, for a more detailed explanation.
Jimmy Grappone is a Realtor® living in the Charlotte area for nearly a decade. His hobbies include fishing, playing golf, watching football, and helping his clients find their way home. Jimmy is a licensed Realtor® with Allen Tate Company in North Carolina and South Carolina. He is passionate about helping his clients find shelter and having a good time along the way!