Without a doubt, there has been a significant amount of upheaval in the country in recent months. The homebuying market has always had its ups and downs, but now more than ever, real estate transactions require due diligence. One task that has always been an important part of the process is an appraisal, which is different from a home inspection. Potential buyers here in Memphis may need to know what an appraisal is and why it is essential.
No one wants to pay more for something than absolutely necessary. This applies to homebuying as much as it does anything else. Considering this is the largest purchase most people make, it is critical to know what they are getting into. An appraisal assesses the condition of the home and gathers information regarding values and sales of similar properties in the area in order to determine the fair market value of the home being purchased.
Most mortgage lenders will require an appraisal. If the results indicate that the sales price is too high, the lender and the potential buyer will need to go back to the seller to renegotiate the price. Lenders are often reluctant to finance a home for more than it is worth, and buyers would not want to start out their homeownership owing more than the property is worth. In some cases, an appraisal will show that the home is worth more than the selling price, which could serve as a red flag for a buyer.
Because of the importance of the appraisal, most real estate transactions include a buyer contingency. Contingencies allow the buyer a way out should something go wrong, but they need to be specific to certain issues such as this one. Since the buyer will not know at the time the purchase contract is signed whether there will be an issue with the value of the home, it is important to make sure the rights and interests of the buyer are protected in that document. Memphis homebuyers may want to work with an attorney to make sure that this and other potential issues are covered in their contracts before moving forward.
