Now that the Inspection Period has concluded, the buyer’s lender should be ordering the appraisal, if not already. This will be a 3rd party individual that will be contacting the seller to schedule the appraisal walkthrough. This is entirely an opinion of value of the appraiser himself. The hurdle for opinion of values is that they are just that, opinions. You can have 3 appraisers in the same house on the same day and all 3 of them have different values. So it is imperative to treat this as the “last showing.” Have the property prepped, lights on, smelly goods going, classical music playing and treat this as if you are “selling” the property to the appraiser. It may be a good idea for buyer and/or seller to provide comparables that support the contract price. Comparables are typically similar properties that have recently sold within the last 6 months, are currently listed, or recently pending.
It is better for all parties to have the property appraise and then be able to smoothly move forward with closing. Typically within 5-7 days after the walkthrough, the lender will receive the appraisal report and notify all parties. If the appraisal comes in at contract price or higher, the transaction continues and the appraisal contingency is completed. If the property does not appraise for contract price, there are a few options. The buyer can elect to cancel the contract and receive their earnest money back, the seller can come down to appraised value, or the buyer and seller can negotiate and come to an agreement of a price in between. However, lenders will only finance up to the appraised value so anything beyond that value, the buyer will need to come up with additional cash. If both parties can not come to an agreement, the buyers can elect to cancel within 3 days of appraisal notice being delivered to all parties. If no cancellation notice is given, the transaction proceeds per the original contract terms.