A property appraisal significantly impacts the sale price, particularly when a buyer uses financing, because lenders base their loan amounts on the appraised value rather than the agreed-upon sale price. Here’s how an appraisal can affect the sale price:
1. Appraisal Meets or Exceeds Offer Price: If the appraisal meets or exceeds the sale price, it generally won’t impact the transaction. Both parties can move forward with the deal as agreed.
2. Appraisal Below Offer Price: If the appraisal comes in lower than the sale price, it can cause complications:
Price Renegotiation: The buyer may ask the seller to lower the price to match the appraised value, especially if they can’t cover the difference.
Buyer Pays the Difference: Alternatively, the buyer may choose to pay the difference between the appraised value and the sale price out-of-pocket, if financially able.
Deal Falls Through: If neither party is willing to adjust and financing is contingent on the appraisal, the deal may fall through.
3. Cash Purchases: If a buyer is paying cash, they might still get an appraisal for their own due diligence, but it won’t directly impact the sale price. However, they may use it to negotiate if the appraisal is lower than expected.
4. Influences Market Perception: Appraisals also influence the broader market by providing comparable values, which may affect the perceived market value of similar properties nearby.
An accurate appraisal helps ensure a fair sale price for both parties by reflecting the property’s true market value.
