Are you looking to learn more about appraisal gap? When you’re selling your home and offers start coming in, it can be appealing to accept the highest offer and move on. To begin learning how things can become complicated if a bidding war gets too out of control in a seller’s market, let’s go over what Greater Cincinnati home sellers need to know about the appraisal gap:
Determining Your Home’s Appraised Value
It’s common for someone unfamiliar with the operations and terminology of the real estate world to quickly get confused, or make inaccurate assumptions.
For instance, you will often run into both buyers and sellers who believe an appraisal is the end-all and be-all way of establishing the value of a property. While an appraisal is a service performed by a trained professional as a way of finding out the value of a property, that doesn’t mean the resulting value is exactly what someone should pay for your home.
This is where we bring in another important term: market value. The appraised value is what is figured to be the general value of the property but the market value is what someone is actually willing to pay for it.
Understanding the difference is important because we live in a time where the market value of a home is oftentimes going to be greater than the appraised value. This means that in the modern real estate market, you will frequently see buyers paying more than the appraised value for a home.
The Appraisal Gap
Now that we know the difference between the appraised and market values of a home, what is this mystical appraisal gap, and why does it matter?
The appraisal gap occurs when a buyer’s offer comes in higher than the appraised value of the property. Or – using our previously-defined terms – the market value (the buyer’s bid) is higher than the appraised value.
This matters in cases where the buyer is attempting to secure financing through a mortgage lender. The reason this appraisal gap can be very bad for you as the seller is because their mortgage lender wants to do their best to approve loans that are safe bets. The last thing a lender wants to do is give out a nice big loan on a property that is worth less than the value of a loan.
The reason for this is, in the event the buyer defaults on their mortgage, the lender is then left with a property valued lower than the loan, and they take on that difference as a loss.
Possible Solutions
The most common way for a buyer to overcome the appraisal gap is to buy their way out of the predicament by paying for the difference, but not all buyers will be able to swing that additional funding so readily.
Depending on where you live and the requirements of the buyer’s lender, you could be able to waive the appraisal entirely. However, this is highly unlikely as a lender worth their salt will want the appraisal done as a protection on their potential investment.
One of the most active ways you, as the seller, can be involved to help keep the transaction alive is to renegotiate with the buyer. This may seem like you’re leaving money on the table, but if the agreed sale price of your home were lowered to a point where the buyer could then pay off the appraisal gap, you’re not losing out on everything.
Help Navigating the Appraisal Gap in Greater Cincinnati
If you’re looking to sell your Greater Cincinnati house, Team Sztanyo can help you sell your house for the highest price, making it effortless for you on your terms. If you don’t want to work with an agent and need to sell your house fast for cash, we can help with that too. We buy houses in Cincinnati and Northern Kentucky for cash – properties in ANY condition and can close quickly. We work with hundreds of local investors to who will rehab the property and hold as a rental or sell to another buyer. So, whether you want to list on the MLS for the most money or sell your house FAST, we can help.
If you have questions like : How do you explain an appraisal gap? Do sellers usually lower price after appraisal? Then give us a call! We take the time to listen to your concerns and answer any of your questions here at Team Sztanyo, with no obligation. Contact Team Sztanyo at (513) 813-6293 today!
Understanding the ins and outs of buying and selling a home can be confusing, especially if you’ve never been through the process before. If you’re looking to buy or sell in Greater Cincinnati and want help navigating the appraisal gap, contact us today at (513) 813-6293!