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Can I Sell my House for More than the Appraised Value?

A home appraisal is the best way to estimate your property’s fair market value based on the location, condition, and recent sales of similar homes in the surrounding area.

Beyond an estimate of how much your property is worth, an appraisal also indicates the amount a lender will let the buyer borrow for your property.

If you have a cash buyer, they don’t need an appraisal for a lender’s approval.

What does an Appraiser do?

The home appraisal process involves a licensed individual called an appraiser. The appraiser can tell you, the buyer, and your lender how much a home is worth.

An appraiser analyzes and consider a handful of factors such as: a. location of your house, b. size of the property, c. quality and condition of the home’s construction, d. significant structural improvements e.g. (additions and remodeled rooms), and e. amenities and any other special features.

Specifically, an Appraiser will Analyze:

a. Exterior of a home

  • Total land area or acreage of the property;
  • Condition of the property; and
  • Any lead paint.

b. Interior of a house

  • Rooms, windows, and closets; and
  • Any built-in appliance upgrades.

c. HVAC system

d. Amenities and facilities

  • Garage (though it does not contribute to the square footage of the home); and
  • Presence of an in-ground pool

The appraiser will rate the property’s condition “good, average, fair or poor” after they’ve evaluated it. Then, they’ll compare it to other homes in the area using special appraisal support software.

Comparable properties are other homes that have sold within the past six months nearby that are similar in size and sale price.

Appraisal Amount vs. Mortgage Loan Amount

An appraisal directly affects the amount of mortgage loan the buyer can get.

Lenders give home loans based on the appraiser’s estimate of the home’s fair market value. It keeps the lender from lending too much money and keeps borrowers from borrowing more than they need for a particular home.

House is Appraised Lower than the Purchase Price

What happens if the appraisal comes in below the purchase price of the home?

Though it might be an unexpected scenario, it can happen (especially with what is happening in the real estate market). 

A low appraisal doesn’t mean that a lender won’t lend money. It means that the lender will give a loan based on the loan-to-value (LTV) ratio agreed to in the proposed contract. The LTV compares the size of the loan with the value of the home. Subsequently, the buyer might need to bring more money to the table to make up the difference.

House is Appraised Higher than the Purchase Price

What happens if the appraisal comes in above the purchase price of the home?

You’re in a good situation if this happens. It simply means that the buyer can obtain a loan for the total amount.

Appraised Value vs. Sales Price

The sales price is when a seller asks for a property and is entirely different from the appraisal value.

As you can imagine, it’s in the seller’s best interest to try to get the home appraised for a value that matches the selling price.

If an appraisal comes back low, a buyer can return to the seller and negotiate a lower sale price. If the seller refuses, the buyer could end up walking away from home completely.

Though an appraiser isn’t looking for things like paint on the walls or children’s toys in the yard, small things can still affect the appraiser’s overall assessment. It’s important to note that while appraisers evaluate some of the apparent issues that may affect the value of a home, appraisals are different from a home inspection.

A home inspection is a much more detailed walkthrough of a house and examines wear and tear, risks, damage, and hazards. A borrower will still need to inspect even if you have an appraisal done on a home.

Here are a few things you can do to influence the appraisal:

Clean your home

The cleaner it is, the more the significant elements of the house will pop out to an appraiser.

Double-check items that leave the first impression

Check on water intrusion anywhere in the house, particularly in the foundation. Make general repairs before an appraiser arrives. If you know the roof has some leaking issues, make those repairs ahead of time.

Organize receipts and take photos of any renovations or improvements

New appliances and other new features, such as repairs to the leaky roof, should be kept as proof of the home’s progress.

In today’s real estate market, low inventory and high demand are driving up home prices. As many as 54% of homes are getting offers over the listing price, based on the latest Realtors Confidence Index from the National Association of Realtors (NAR).

Shawn Telford, Chief Appraiser at CoreLogic, elaborates:

The frequency of buyers being willing to pay more than the market data supports is increasing.

While this is great news for today’s sellers, it can be tricky to navigate if the price of your contract doesn’t match up with the appraisal for the house. It’s called an appraisal gap, and it’s happening more in today’s market than the norm.

According to recent data from CoreLogic, 19% of homes had their appraised value come in below the contract price in April of this year. That’s more than double the percentage in each of the two previous Aprils.

If an appraisal comes in below the contract price, the buyer’s lender won’t loan them more than the house’s appraised value. That means there will be a gap between the amount of loan the buyer can secure and the contract price on the house.

In this situation, both the buyer and seller have a vested interest in ensuring the sale moves forward with little to no delay. The seller will want to make sure the deal closes, and the buyer won’t want to risk losing the home. That’s why it’s common for sellers to ask buyers to make up the difference themselves in today’s competitive market. Learn more about Appraisal Gaps with this article.

Get your home appraised today! Click here for a free home valuation of your property.