6. Money Matters

Money Matters: Appraisal and Loan Approval

Mortgage lenders require home appraisals on most properties to make sure they’re not giving a mortgage for more than a house is worth*. An appraisal determines “fair market value” based on recent sales of similar properties. Cash buyers can also order an appraisal and make the sale contingent on the property appraising at contract price.

If the appraised value is lower than the contract price, then the buyer can:

  • Put more money down to make up the difference.
  • Ask the seller to adjust the purchase price.
  • Cancel the purchase without penalty.

If the seller feels that the appraiser made an error, the seller might ask for a re-evaluation. Usually the listing agent asks that the appraiser verifies that the information in the appraisal is correct (like square footage, updates and amenities), or asks to include additional comparable sales in the analysis.

When the appraisal is complete, and all your other documents are in order, the package goes to the lender’s underwriting for approval of your mortgage loan. Final approval of the loan usually takes several days to a week.

*Under federal regulations approved in 2019, some properties insured by Fannie Mae properties will qualify for an appraisal waiver. Your loan officer will know the details.