What does it mean to pass or fail a home appraisal?
Local home in the much loved community “The Bridges at Shadow Glen”. (a.k.a. “The Bridges”) Built by Pahlisch Homes, one of Central Oregons premiere builders.
When you're in the process of buying or selling a home, one of the most important steps is the home appraisal. This process involves a professional appraiser visiting the property to evaluate its condition, features, and overall value. The goal of a home appraisal is to determine a fair market value for the property, which can then be used to guide negotiations between the buyer and seller and help the bank determine what amount they will finance for any particular home.
But what does it mean to "pass" a home appraisal, and why is it so important?
To pass a home appraisal simply means that the appraiser has determined that the value of the property meets or exceeds the agreed-upon price between the buyer and seller. If the appraised value comes in lower than the agreed-upon price, it can cause problems for both parties. For the buyer, it may mean that they have to come up with more money upfront to cover the difference between the appraised value and the purchase price. For the seller, it may mean that they have to lower their asking price or risk the sale falling through.
If the home appraises over the agreed purchase price, well, no worries there… just a big congratulations to the buyers, you just bought a house worth more than you paid for… or in other words: Continue pass GO and collect $200. :D
Passing a home appraisal is important for several reasons. First, it provides reassurance to both the buyer and seller that the property is worth what they have agreed to pay for it. This can help to prevent disputes and misunderstandings down the line. Second, a successful appraisal is often a requirement for securing a mortgage. Lenders want to ensure that they are not loaning more money than the property is worth, so a favorable appraisal is a key part of the underwriting process.
The bank will only finance what the appraiser says the home is worth, not the price the buyer and seller agreed upon.
In addition to determining the value of the property, a home appraisal can also uncover any issues that may need to be addressed before the sale can go through. For example, if the appraiser notices a leaky roof or a faulty electrical system, the seller may need to make repairs before the sale can be completed, especially if certain criteria is required by the loan program the lender is using. For example, with an FHA loan, there can’t be any chipping paint or broken windows. In this way, a home appraisal can help to protect both the buyer and seller by ensuring that the property is in good condition and is worth the agreed-upon price. (This is not the same as a General Inspection, that will need to be done separately by a professional home inspector, typically within 10 days of mutual acceptance in Oregon State.)
In conclusion, passing a home appraisal is an important milestone in the home buying and selling process. Once you pass the appraisal, you can take a deep breath, knowing you’re successfully one step closer to the finish line.