What Happens if Appraisal Comes in High?
What Happens if Appraisal Comes in High?
So what happens when an appraisal comes in higher?
Essentially nothing. It's a good thing in essentially the buyer has already created equity in the property, but it doesn't really impact the deal.
It doesn't effect the financing because a bank will take the lower of the appraised upon value or the agreed upon price.
Questions people sometimes ask and that we answer:
With the higher appraisal, do I get extra money or can I finance more?
Does the seller find out about the higher appraisal?
Can the seller charge me more?
Transcript of Conversation:
- What happens when an appraisal comes in higher? Hi, I'm Jeff Chubb with the eXp Realty and we're here with Jason Bonarrigo of RMS Mortgage talking to you about what happens when that appraisal comes in higher and make sure you stick around to find out at the end of the video what we're doing with a thousand dollars. So, Jason, tell me first off, what is an appraisal?
- Well, an appraisal is a way that the lenders essentially certify the market value of the property. We don't always put in exact numbers of the purchase and sale. So we have an independent third-party go out there and see what the market analysis is.
- Okay. So we get the appraisal. So comes back, what happens if that appraisal, that third-party opinion of the value, actually comes in higher than agreed upon price?
- So let's just say agreed upon price is 500,000
- and that appraisal comes back 520.
- Yeah. Nothing. No, I mean, essentially it doesn't really impact, it's certainly not a negative thing for the buyer.
- Right. Good thing
- it's a good thing. They, you know, essentially tactically could have picked up maybe 20 grand in equity.
- A hypothetical extra 20,000
- It doesn't mean that it's not real money,
- but yeah it doesn't really impact their financing. It's good to know. But again the key point there is obviously as a lender, we're always going to take the lesser of the two
- The lesser of the two.
- The lesser of the two, So if the purchase and sale is 500 and the appraisal is 520 we're going to go off the purchase and sale. And obviously, as we talked about in another video is if it goes the other way we're going to always take the lesser of the two.
- Okay, so some questions that I get and I think they're great questions
- from buyers is
- yep all right, that appraisal came in higher. Do I get that extra money somehow? Can I finance more? I mean, again, you have it down the line
- once you've taken control of the property and you own it, again, that market value is indicated in that
- You have that hypothetical equity.
- We have the hypothetical equity.
- There you go. Say that twice but no, you don't again because we're going off the lesser of the two the financing is going to stay the same. So it's not any cash that you're going to realize at the closing, yeah.
- right. Okay, so what about, so that appraisal comes back at 520. Number one, does the seller find out about that and do they now charge me that 520? Or can they change the sales price of our property?
- We get that question a lot. I mean, it does, you know, the appraisers don't bring it in well over purchase and sale, it happens very rarely, but we do get that question. Is that real money? And no, the seller doesn't, I mean they can have the right to find out, but it doesn't mean that they have the right to change the negotiations. They have a signed contract,
- they're under agreement and it's only a good thing for both parties.
- Well, and I think the other part of that is is that who owns that appraisal?
- So the buyer islands that appraisal
- Right and they are certified to get a copy of it
- so the seller actually has no right to that appraisal.
- They don't.
- And the only time we really give the seller the appraisal is if there's an issue, right?
- if there's an issue on a negative side or we have to go back to the negotiation table
- We're not going to say, Hey, it came in value. It's only, it only certifies their value as well and their selling price. So it's usually a good thing.
- Yeah. Perfect.
- Yeah. Well stick around for that thousand dollars. I'm Jeff Chubb with eXp Realty, Jason.
- Jason Bonarrigo, RMS mortgage 413-5038.
- And our number is 480-2600 or online at Boston2.com So that $1,000, make sure that you hit that subscribe button below because when we hit 1000 subscribers, we're going to give a thousand dollars to the ASPCA. We're trying to save some puppies and some cats.
- And some cats, right
- so we'll include that
- and some cats would be good too
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