Could a low valuation doom the sale of your home?
If you are selling a house, you can assume that receiving an offer from a buyer is the end of the story. You can accept the offer, the buyer will buy your home, and you are free to move on to your next adventure.
The only problem is that a lot of potential things can go wrong even after you’ve accepted an offer. And one of the most common issues that could affect the ability of your sale to come to fruition has to do with a home appraisal.
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How might an appraisal affect your home sale?
Many buyers who make an offer to purchase a home will make it subject to certain conditions. And one of the most common contingencies is a valuation contingency.
When an appraisal contingency is included in a sales contract, the buyer agrees to buy your home as long as it values at the purchase price. This means that a professional appraiser will need to come and assess the condition of your home, compare it to other similar properties that have been sold recently, and determine the market value of your home.
Buyers can put an appraisal contingency in a contract because they get a mortgage and their lender won’t lend them more than a certain percentage of the home’s value. Or they can put an appraisal contingency in the contract to make sure they don’t end up paying too much even if they pay cash for the house.
The problem is that sometimes the appraiser will decide that the house is not is actually worth as much as the buyer offered to pay you for it. If the valuation is too low, the buyer would usually have the option to opt out of the transaction, so the sale could fail entirely. Or they might ask you to lower the price to the estimated amount, which would mean you might be forced to accept less money than you want or risk losing the buyer altogether.
Unfortunately, with today’s sellers’ market, many buyers are bidding high on homes in order to get their bids approved – but the homes don’t necessarily value those high amounts that buyers are bidding on. Therefore, there is a good chance that you will find yourself facing this type of situation, especially if you accept a very high bid on your property.
What to do as an owner to reduce the risk of a valuation problem
As an owner, there is little you can do to prevent a sale from collapsing if the valuation is low. While a buyer can decide to close a sale anyway, they may choose not to, or may be unable to do so because their mortgage lender will not give them a large enough loan.
While you want to make sure your home looks great for the appraisal, things like cleaning and decluttering can’t go further. The most determining factors in assessing market value are things that cannot easily be changed, such as square footage or number of bedrooms.
You can, however, evaluate the offers carefully. If you receive multiple offers from buyers for your home and one does not include an appraisal eventuality, it may be a good idea to choose this one, even if it is a little lower than another offer that does. made. By choosing an offer that is not dependent on a successful review, you are removing a potential hurdle that could affect the flow of the sale.