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HOME APPRAISAL - Everything You Need To Know


SO! You have found your "forever home" and now it’s time to cross all your T's and dot your I's before it’s all yours.


The first item on a closing checklist is the home appraisal. So, what exactly is an appraisal, what is appraisal contingency and why is it important and what should you expect?


A home appraisal is essentially a value assessment of the home and property. It is conducted by a certified third party and is used to determine whether the home is priced appropriately, this ensures that the buyer is protected and that the home is worth the listing price the seller is requesting

During a home appraisal, the appraiser conducts a complete visual inspection of the interior and exterior of the home. They factor in a variety of things, including the home’s floor plan functionality, condition, location, school district, fixtures, lot size, and more.

An upward adjustment is generally made if the home has a deck, a view, or a large yard. The appraiser will also compare the home to several similar homes that were sold within the last six months in the area.


The final report must include a street map showing the property as well as the other properties they used to compare, photographs of the interior and exterior, an explanation on how the square footage was calculated, market sales data, public land records, and more.


After it is complete, the lender uses the information found to ensure that the property is worth the amount they are investing. As mentioned this is a safeguard for the lender as the home acts as collateral for the mortgage. If the buyer defaults on the mortgage and goes into foreclosure, the lender generally sells the home to recover the money borrowed.


Some buyers choose to waive the right for appraisal, however, those buyers can't be financing their purchase, it has to be a cash offer. In the case of financing, the bank or mortgage company will always require a home appraisal to be made in order for them to protect their investment.


What is an appraisal contingency?

An appraisal contingency is simply a clause in the contract/offer which states that the buyer has the right to blackout from the offer without losing their earnest money in case the property does not appraise for the agreed-upon price.


This acts as a protection for the buyer's earnest money in case a deal can't be struck between them and the seller

So what exactly happens if the home does not appraise for the offer accepted?

If the appraisal comes back and it's lower than the offer amount, lenders will only pay the appraised amount, even if the buyer is approved for more. so in most cases, the buyer will generally have to pay the difference out-of-pocket if they choose to proceed. However, many things could happen as well.


If you have an appraisal contingency

You can back out from the deal without losing your earnest money, however, your REALTOR® can help you negotiate a deal with the seller where the seller can go down on the price, they can pay half of the difference and/ or all of the difference.


If you don't have an appraisal contingency

Technically speaking you could back out of the deal, but you would be defaulting on the contract terms, and accordingly, you would forfeit your earnest money and risk being sued for not performing on your contract as stated.


In most cases, sellers will just settle for the earnest money for the inconvenience and delay, but legally speaking, if they chose, they could pursue legal action against you to force you to proceed, and that's why an appraisal contingency is very important.


Do you have any other questions regarding appraisal? Give us a call, send us a text or shoot us an email, we would love to answer all your questions.


We hope the above information helps you!


For more information on Real Estate, buying, selling, or investing, don't hesitate to reach out, we would love to help!

Gabriel and Kristina

The Zachary Team and San Antonio's REALTOR® Couple

210-504-5301



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