Demystifying Property Appraisals: What Every Seller Should Know

By Desi Williams

I'm a Real Estate Broker. I'm good at what I do, and I'll be there with you every step of the way, because I don't know any other way. I'm more than just a buying and selling agent, I'm somebody who wants to help you create your next paradise with everything that means – to you.

As a seller, the appraisal process can often be a source of stress and uncertainty. The lack of knowledge about what to expect and how appraisers determine the value of a property can leave sellers feeling overwhelmed. Today, we’ll demystify the appraisal process and highlight its importance for sellers. By understanding the appraisal process, sellers can navigate potential challenges and make informed decisions. So, let’s dive in!

An appraisal is essentially one person’s opinion of the value of your property on a specific day and time. It’s important to note that an appraisal is not a definitive or permanent valuation, as property values can fluctuate rapidly. Rather, it provides an assessment of the property’s worth at that particular moment.

Appraisals can yield three possible outcomes: low, high, or right at value. While most appraisals tend to align with the agreed-upon value, a low appraisal can create what is known as an “appraisal gap.” This situation occurs when the appraised value is lower than the contract price.

If your home appraises for less than the agreed-upon contract price, you have several options to consider:

• Negotiate with the buyer: The buyer can choose to make up the difference in cash, bridging the appraisal gap.
• Adjust the price: As a seller, you can opt to reduce the price to match the appraised value.
• Meet halfway: Finding a middle ground, where both the seller and the buyer compromise on the price difference, is another viable option.
• Terminate the contract: If there is no agreement between the parties on adjusting the price, terminating the contract may be necessary.

In some cases, if both the agents involved in the transaction believe that the appraisal was unfairly low, there are additional options to consider. A rebuttal or even terminating the transaction with the lender can be pursued. This allows for the possibility of engaging a different lender and obtaining a second opinion from a different appraiser.

To illustrate the impact of a low appraisal, consider a situation where the initial appraiser valued the property at $40,000 below the contract price. Both parties disagreed with this evaluation and decided to cancel the transaction with that lender. A week later, a new appraiser assessed the property and valued it at $10,000 above the contract price. This example highlights the potential for significant swings in valuation within a short period.

Given the complexity and potential implications of the appraisal process, it is crucial for sellers to seek professional guidance. Partnering with a knowledgeable real estate professional can provide sellers with a thorough understanding of their options and help them navigate any challenges that arise during the appraisal process.

By being aware of potential outcomes and exploring available options, sellers can effectively navigate the appraisal process and make informed decisions. Remember, seeking the assistance of a qualified real estate professional can greatly enhance your experience as a seller. Reach out to us by phone or email if you have any questions.