Do Sellers Get a Copy of the Appraisal Report?

An appraisal is a step in many real estate transactions, particularly those involving a mortgage. Its primary purpose is to provide an objective valuation of a property, ensuring that the amount a lender is willing to finance aligns with the home’s market value. The appraisal helps to determine a fair market value for the property.

Understanding Appraisal Report Recipients

The appraisal report is ordered by and prepared for the buyer’s lender. In most real estate transactions, the lender is considered the appraiser’s client because they initiate the appraisal to assess the risk associated with financing the property. While the buyer often pays for the appraisal as part of their closing costs, the report itself is owned by the lender.

Due to client confidentiality and professional ethical obligations, the appraiser cannot directly provide the report to the seller. The appraiser’s primary responsibility is to the party who ordered the report, which in a financed purchase is the lending institution.

The appraisal serves to ensure that the loan amount does not exceed the property’s actual value, thereby protecting the lender from potential losses if the buyer defaults. The lender needs this report to confirm the property’s value matches the loan amount they are providing. While the buyer is entitled to a copy of the report, often receiving it with other closing documents, they cannot use it for other purposes without the lender’s permission.

Seller Access to Appraisal Information

Direct access to the appraisal report for sellers is uncommon in standard transactions. The primary way a seller might gain insight into the appraisal’s findings is through the buyer or their agent. If the appraised value impacts the transaction, such as coming in lower than the agreed-upon price, the buyer may choose to share the report or relevant details with the seller. This sharing occurs during renegotiations to adjust the sale terms.

For certain loan types, like FHA or VA loans, there can be specific considerations regarding appraisal information. An FHA appraisal, for instance, remains valid for the property for six months, which means it might be a factor for subsequent buyers if the initial sale falls through. VA loans also have specific Minimum Property Requirements that must be met, and the appraisal will note any necessary repairs. However, even with these loan types, direct receipt of the report by the seller is not standard practice; information is conveyed indirectly if it affects the transaction.

Addressing Appraisal Outcomes

When an appraisal is completed, the results can influence the real estate transaction, particularly if the appraised value is less than the agreed-upon sale price. This situation, often referred to as a “low appraisal,” means the lender will only finance up to the appraised value, not the higher sale price. This creates an “appraisal gap” that needs to be resolved for the sale to proceed.

Several scenarios can unfold if the appraisal comes in low, largely depending on the terms of the purchase agreement and the buyer’s financial capacity. One common option is for the buyer to cover the difference between the appraised value and the sale price in cash. This involves the buyer bringing additional funds to closing beyond their planned down payment.

Alternatively, the buyer and seller may renegotiate the sale price to align with the appraised value. This might involve the seller lowering the price, or the parties meeting somewhere in the middle.

Many purchase agreements include an “appraisal contingency” clause, which protects the buyer if the home appraises for less than the offer amount. With this contingency, the buyer has the option to renegotiate the price or terminate the contract and receive their earnest money deposit back without penalty.

If the seller refuses to adjust the price and the buyer cannot or will not pay the difference, the contract may be terminated. Sellers must consider these options, as a low appraisal can delay or even cancel a sale, requiring them to relist the property.