Should A Cash Buyer Get An Appraisal? - Home Appraisals, Inc (2024)

FAQs

Should A Cash Buyer Get An Appraisal? - Home Appraisals, Inc? ›

There is no legal need of an appraisal for a cash home buyer. Thus, if someone is paying cash, an appraisal is not required. However, a buyer may choose to have a home appraisal even if they're not opting to do any type of traditional financing. For peace of mind, an appraisal may be a good idea.

An in-person appraisal can also slow down a home sale, especially if an appraiser determines that a home is worth less than the amount a buyer has agreed to pay for it. For these reasons, some buyers ask for an appraisal waiver, which would allow them to purchase a home without a formal appraisal.

While the lender is technically the owner of the appraisal, as a home buyer you still have certain rights: You have the right to obtain your own appraisal, even if you are paying cash for a property. You have the right to know what type of valuation service is being ordered for your loan.

An appraisal gap happens when the house appraises for less than your offer. You can pay the difference or renegotiate. Holden Lewis is a mortgage reporter and spokesperson who joined NerdWallet in 2017.

The buyer could pay more than what an independent, qualified professional, carefully calculated the property's value to be but generally the price is renegotiated lower. That's because lenders base their loan amount on the appraisal or purchase price, whichever is lower.

The lender makes a loan based on the loan-to-value ratio that was agreed to in the contract. Many contracts contain a loan contingency, so if the appraisal comes in low, the buyer cannot buy the property under the contract's terms and can then cancel the contract.

“You can't always avoid [a low appraisal],” says Megan Walters, a top-rated agent who sells homes more than 41% faster than the average agent in her Columbia, Missouri, market. Most appraisals come in at the right price. According to CoreLogic, in general, appraisals come in below contract only about 7-9% of the time.

The mortgage lender orders the appraisal and is the appraiser's client. Sometimes a lender will use an appraisal management company (AMC) to manage the appraisal process. An AMC will order an appraisal on behalf of the lender. Some lenders order the appraisal directly from an appraiser.

Wait for the right time to send the mail. If you recently receive a pay rise for achieving a goal or target, now may not be the right time to seek the appraisal. Even if you do seek the appraisal, give a good reason for it. Look for meeting the boss when you send in the appraisal mail.

Because the appraisal primarily protects the lender's interests, the lender usually orders the home appraisal while the borrower generally pays the fee.

Can buyer change price after appraisal? ›

If an appraisal comes back low, a buyer can go back to the seller and negotiate a lower sale price or walk away from the sale entirely.

At the time of purchase the value is based on the lesser of the appraised value or purchase price. Therefore, if the house appraises higher you still must base your down payment on the actual purchase price.

Real estate experts estimate between 10-20% of appraisals come in lower than the sale price.

Assuming your buyer's lender is doing an appraisal, you'll need it to come back at or above your selling price in order for the deal to move forward. While there's no guarantee your home will appraise at the selling price, low appraisals are a bigger risk in a sellers market.

Options to maximize your home's appraisal value can include bolstering the property's curb appeal, documenting home upgrades, making minor repairs, deep cleaning the home and doing your own comparison analysis. It's also important to accept what you can't control.

You may try to negotiate a lower price with the seller, but if a compromise can't be reached – or you can't pay the difference to cover the appraisal gap – the sale could fall through. Also keep in mind that a low appraisal can ultimately affect how much equity you have starting out in your new home.

Your real estate agent will take the lead in pushing back on a low appraisal. If they find a discrepancy in the report, they can ask for a correction/revision. Some common problems that can lower an appraised value include miscalculation of square footage or failure to include garages/sheds or recent renovations.

In other words, a lender will waive the appraisal if they have solid evidence that the home value matches the loan they are willing to give. In addition, lenders perceive less risk when a buyer can quickly build equity in the home.

A lender can ask you to “waive” your right to get a copy of valuations three business days before closing. This means you agree that the lender does not have to provide you with a copy three days in advance of closing. Even if you waive this right, the lender still has to give you a copy of any valuations.

The above issues might seem concerning but, according to Fannie Mae, “the vast majority of appraisals confirm contract price.” In fact, they come back low less than 10% of the time. So, chances are, you won't run into this issue.