Whenever a Buyer is obtaining a mortgage for a home loan, the lender always requires a property appraisal. For jumbo loans there are usually two appraisals required. What happens if the property does not appraise for the offered purchase price? How important are the agents for this process?
Low value appraisal
- If the price cannot be justified by comps, the Buyer and Seller may re-negotiate to have the Buyer pay the difference in cash, to reduce the purchase price to the lender's satisfaction or to cancel the deal. A resolution may depend on the offer terms, if an appraisal is, or is not, a contingency.
Agents' (very important) role
- It is important for the Buyer's and Seller's agents to have local sales knowledge. If an appraiser is not familiar with the area or does not know the nuances of a particular listing, the agent(s) can and should educate.
Off-market home sales (not listed in the MLS) do not normally generate the highest price. Yet, agents are obligated to submit the sale information to the MLS. These off-market and foreclosure sales often diminish area property values, and an appraiser needs to take this into account. Selling a home and promoting to the masses will always generate top-dollar. During a strong housing market, when multiple offers create a frenzy, a Buyer may pay over "market" to ensure the winning bid. Seller, beware of a "bait and switch" strategy when a Buyer asks for a price reduction during escrow. However, the ultimate decision is a Seller's choice.