Does the Seller See the Home Appraisal?
Demystify home appraisals. Learn what valuation information sellers typically receive and its implications for their transaction.
A home appraisal is a professional assessment that determines a property’s market value. Its purpose is to provide the buyer’s mortgage lender with an independent evaluation of the home’s worth. This assessment ensures the property’s value adequately supports the loan amount the lender is considering.
Understanding the Appraisal Process
The appraisal process typically begins after a buyer’s offer has been accepted by the seller. The buyer’s mortgage lender usually initiates the appraisal, as it is a requirement for most home loans. While the lender orders the appraisal, the buyer is generally responsible for paying the associated fees, which commonly range from $300 to $500. An appraiser, who is a state-licensed and certified expert, conducts the evaluation to provide an unbiased estimate of the home’s value. This process protects the lender by confirming the property’s value is sufficient to secure the loan.
Who Receives the Appraisal Report
The appraisal report is provided to the buyer and their mortgage lender, with federal regulations requiring lenders to furnish a copy to the borrower upon request no later than three days before loan closing. The seller does not receive a copy of this report. This is because the appraisal is for the benefit and use of the lender, and the appraiser’s client is the lender, not the seller. Appraisers are expected to maintain independence and confidentiality, meaning they cannot share report contents with anyone other than the client or designated users. The seller would only receive a copy if they had commissioned a pre-listing appraisal themselves.
Information Shared with the Seller
While the appraisal report is not shared with the seller, certain information from the appraisal is communicated to them. This communication occurs if the appraised value is lower than the agreed-upon sales price. The buyer’s real estate agent relays this information to the seller’s agent, including the appraised value and the implications for the transaction. If the appraisal comes in at or above the contract price, the seller might not be explicitly informed of the exact appraised value. In such cases, the transaction proceeds without issues related to appraisal.
Impact of Appraisal Value on the Seller
The appraised value can impact the seller, especially if it falls below the agreed-upon purchase price, creating an appraisal gap. When this occurs, the lender will only finance up to the appraised value, potentially jeopardizing the sale. The buyer then has several options, which directly affect the seller, including making up the difference in cash, renegotiating the sale price, or even terminating the contract if an appraisal contingency is in place.
In response to a low appraisal, sellers have choices. They might agree to lower the sale price to match the appraised value. Alternatively, sellers could attempt to dispute the appraisal by providing additional comparable sales data or highlighting overlooked property features. Another option is to decline renegotiation and put the home back on the market, risking a longer sale period and the possibility of another low appraisal. Buyers might also request seller concessions to cover a portion of the appraisal gap, which could involve the seller contributing to closing costs.