Appraisal Contingency – What does it mean?
Congratulations! You’ve listed your home for sale, accepted an amazing offer, and are starting to book the movers and pack your bags! But wait, what does it mean when the buyers have an appraisal contingency? Should you be worried? We wanted to break down the process and how best to navigate through having your home appraised.
- What is a home appraisal? Simply put, an appraisal is the process where a licensed appraiser comes to your home for a thorough inspection, verifying bedrooms, bathrooms, additions, and overall condition of your home. If you have made any recent updates to your home, they will notate that as well. This process, along with looking at comparable properties using certain criteria, helps them determine what they believe your home is worth. Typically, the buyers’ lender will order the appraisal. This helps the lender determine how much they will loan the buyer for their purchase.
- How long will the appraisal take? Generally, the lender will order the appraisal as soon as the buyer is under contract. It may take a few days to have an appraiser actually schedule a day and time to come to your home. Once the appraiser arrives, the time it takes them to assess your property is usually quick, maybe 30-60 minutes. Depending on the type of the loan, the appraisal report can then take another 2-7 days.
- What should I do in preparation for the appraiser’s appointment? The more you can make your home shine in prep for the appraiser’s appointment, the better. Much like you did for any showings, try to have your home neat and tidy. It also helps to have a list of improvements you’ve made to the home typed out and ready to share with the appraiser.
- Will I see the report? As the seller, you will not know the exact appraised value if it falls “at or above” the sales price. You’ll simply learn that the appraisal is good and the contingency can now be removed. However, if it does fall below the sales price, you will be advised as to what the “gap” between the appraised value and the sales price is so that you can understand the next step in the process.
- So, what if the appraisal is low? As mentioned above, if the appraisal is low (below sales price), the buyers have a few options:
- Negotiate the sales price down to the appraised value with you, the seller
- Bring more cash to the table to make up the difference
- Walk away from the deal
- What if I’m not willing to lower the sales price? If you are not willing or able to lower the sales price to meet the appraised value, the buyer has the option to void the contract. Often, a meeting in the middle can be negotiated.
- What if the appraised value seems way off? If the report from the appraiser comes back below sales price and you and your agent disagree with the price, there is the option to request a new appraisal. Your agent should provide some of their own comps to support the argument. Additionally, it is helpful if you can provide a list of all of the improvements that have been done to the home.
- Should I have my home appraised prior to listing? We don’t recommend having an appraisal done prior to selling your home, as each appraiser may come up with a different value. Appraisals can also cost around $700-800. Having a frank discussion with your real estate agent about properly pricing your home for sale is your best bet.
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