Why Appraisals Matter When Home Buying
So you’ve had an offer accepted on your dream home, congratulations! You may think it is smooth sailing from here on out, but there are other considerations and information coming soon that may take you by surprise.
When purchasing a new home, many people are required to have an appraisal completed to assess the value of the home. This will usually consist of hiring a company to visit your home, take measurements, assess the state of the home, and compare it to other real estate sales in the area. After this is complete, the company will tell you how much the home is worth.
Knowing the value of your potential new home is a crucial part of the home buying process. It is important for you to know how valuable the new property is for your own records, but the bank will also want to know when they consider the amount and terms of your new mortgage.
For example, if the offer that was accepted on a new home is $400,000, but the appraisal of the home only comes back with a value of $350,000, this will be an alarming number for the bank. When the bank takes your mortgage on, it needs to know that if something were to go wrong, they could place your home back on the market and make their money back. In the example above, the bank would not make its money back which would make it a risky investment for them.
Sometimes in this case, the bank will ask the new homebuyer to pay the difference between the accepted offer and the appraisal value of the home. Referencing the example above, this would make the new homebuyer would have to pay $50,000 out of pocket in addition to the down payment.
Appraisals are also designed to safeguard homebuyers from spending too much on something that may not be worth it. Taking out a loan that is larger than what you need is a recipe for disaster in the housing market. It is important for buyers to have all the information they need when purchasing a home, including how much the home is worth, not just its perceived value.
Appraisals are meant to protect all the parties involved when purchasing a home. It can help us prevent another housing crisis similar to the one that happened in 2008 and give homebuyers peace of mind that they are making a sound investment.
Now through the end of March, Kurv Loans is offering all our clients who use our team of real estate professionals $600 off their appraisal fee! This important step before getting your home is now covered by Kurv Loans, making your dreams of being a homeowner closer to becoming a reality!
If you or someone you know is interested in purchasing a home, contact our team today to see what your options and next steps might be!