Let’s address the elephant in the room: the appraisal. Recently, I’ve received two low appraisals in this market. This isn’t the best news when you’re the seller since the bank will only lend on the appraisal value. However, it’s sometimes good news for the buyer because they know they aren’t overpaying for a property.
An appraisal protects the lender’s mortgage. It’s a requirement by lending institutions when one obtains financing for a home. The buyer typically pays for this and it’s approximately $500-$700. The bank hires an appraiser to assess the value of the property when the buyer is under contract. If the appraiser says the value is worth the purchase amount or more, then both parties proceed to the closing table. However, if the appraisal value comes in lower than the purchase price – then both parties have five days to renegotiate the sales price per the standard sales contract.
The seller does have the option to ask the appraiser for a reconsideration. Their realtor can send comparative properties that have recently sold and identify upgrades and improvements to the property that would add value. Appraisers are heavily regulated to make sure they are telling an accurate amount. If the appraisal value remains lower than the purchase price, then both parties need to agree to the appraisal amount, or either party can make up the difference with cash. If both parties can’t agree, either party can cancel the contract on day six.
In this seller’s market where inventory is low, and buyer competition is still high – there are instances when buyers will waive their appraisal or pay for an “appraisal gap.” For example, if the appraisal comes in lower than the purchase price, then the buyer would be willing to bring the difference in the amount to the closing table.
Cash buyers don’t have to do an appraisal. Sometimes they will buy an appraisal to verify the value of the home. It’s not a requirement for the purchase of the property. This is a big reason why sellers select cash offers – because they typically don’t have to deal with the appraisal process. One less step to get to the closing table. Cash is king.
Johnson County market update
This week in Johnson County there were 1165 active listings, and 1235 listings went under contract (Source: Heartland MLS, August 4, 2023).
I’m proud to be nominated as a top finalist for Real Estate Agents in Best of Johnson County 2023 – vote here. https://bluevalleypost.com/best-of-johnson-county-2023/#/gallery/386014561/
About Maggie
Maggie is a ReeceNichols real estate agent and a third-generation realtor. It’s her passion to provide a professional and positive buying and selling experience to her clients. Maggie has been featured in Realtor.com, Apartment Therapy and in other publications. https://maggief.reecenichols.com/
Follow her on Instagram and Facebook for updates on the local market.
