The home buying process is equal parts exciting as it is nerve-racking and time-consuming. After you’ve shopped around, been to open houses and toured many AZ golf homes, you may think finding the right home for you was the tough part. Well, the fun has really just begun. If you are financing any part of purchase price of your new home, you’ll have an inspection, appraisal and other closing considerations.
As we covered in our blog on the top three reasons why real estate contracts fall through, appraisals can make or break a sale. So exactly what is an appraisal and how does it play into the home buying process?
In simple terms, the real estate appraisal is an educated and somewhat calculated guess as to the worth of the property. If you are applying for a mortgage, lenders (banks) will not let you borrow the money without an appraisal. Most lenders will not loan you money beyond the appraised value of the property (minus your down payment). This is how the appraisal process can sink a sale. A bank does not want to lend a borrower more than the home could be reasonable sold for if the borrower defaults on the mortgage.
As we saw after 2008, defaults happened a lot and banks were stuck with loans higher than the appraised value of the properties. Because of that bubble and subsequent bust, appraisals have become stricter through federal guidelines. What once took a few days can now take a few weeks, appraisers and underwriters can request even more background information to build a more complete picture of the property’s worth.
One of the trickiest parts of the appraisal is that it comes further along it the home buying process, after a price has been negotiated and agreed upon, and after the home buyer has been pre-approved for a loan for a certain amount.
If you have an idea that the property is worth less than what you are paying, you can address this in the contract, allowing for re-negotiation or a back out clause if the property comes back as worth less that you are borrowing. Without this contingency, you could be stuck covering the difference.
It really is in everyone’s best interest that the appraisal comes in close to the contract price. While the lender selects the appraiser, the cost ranges with the average coming in at about $300. To determine the worth of the home, the appraiser looks for key elements like square footage, bedrooms, bathrooms, any issues that may have come up in an inspection, and comparable properties in the area. Your realtor can also review the appraisal and comps that the appraiser used to ensure accuracy.
As with every step in the home buying process, having a strong and competent realtor by your side can make all the difference in the world. Your realtor can not only review the appraisal for accurate comps, but can also help you challenge the appraisal and get a second opinion, if necessary. If you’re interested in golf course homes for sale in Scottsdale AZ but want to make sure you only pay for the true worth of the home, contact The Matheson Team today. We’re real estate experts specializing in AZ golf homes and Arizona golf communities.
Realtor | Founder
The Matheson Team – RE/MAX Fine Properties
21000 N. Pima Rd., #100, Scottsdale, AZ 85255