Step 19: The appraisal

Because the appraisal is usually paid for by the Buyer, though it will depend on what was negotiated in your contract, generally we wait until after repairs are agreed upon before directing your lender to order the appraisal. That way you aren’t obligated to this additional cost should major issues come up during the inspection or an agreement on repairs isn’t reached with the Seller.

It usually takes at least a week for the appraiser to visit the property, and then they will submit a report to the lender which includes their estimate of the market value based on factors like comparable properties, some of the home’s features, and the current market conditions. Keep in mind an appraisal is just that one person’s opinion of value and they can tend to be more conservative. Some factors which might add a lot of value to you as a Buyer, particularly views & backyards (pool), don’t add as much value in an appraisers eyes. Once complete, you should receive a copy of the appraisal from your lender.

Per the contract, if the home doesn’t appraise for at least the purchase price the Buyer has an opportunity to cancel the contract within five days and receive a refund of the earnest money. Other options do exist though and can run from the Buyer putting down a larger down payment as necessary or the Seller reducing the purchase price. It’s worth noting that the Seller is not under any obligation to reduce the purchase price. This is a common misconception for some Buyers. However, a Seller will usually weigh the possibility of the same thing happening on a future contract and having to go through the process of showings, inspections, etc. again.

AAR Residential Resale Purchase Contract - Appraisal Contingency
AAR Residential Resale Purchase Contract Lines 107-110

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