Are you considering removing your appraisal contingency as a buyer? If so, there are three things you need to consider. First, know that if you remove your appraisal contingency to get your offer accepted, you need to come up with the difference out of pocket if your lender’s appraiser says the home’s value is less than the value you and the seller agreed upon. Unfortunately, as we’re entering a very competitive market, needing to do this is becoming more and more common. Still, before you make this decision, there are three things you need to consider.
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1. Proof of funds. This includes bank statements, your 401k, and brokerage statements to show where your down payment and closing costs are coming from. If you can prove you have the money, this will show the seller that you would also have the funds to cover the difference in case of an appraisal gap. If the seller knows you are ready in a worst-case scenario, that will set you apart on top of you removing the appraisal contingency.
2. Reviewing the comps. Before you remove your appraisal contingency, go over the comparable houses to get a baseline for what the house is worth. Look at homes that have been sold in the last six months, are within 30% high or low of your house’s square footage, have similar upgrades and features, and are within two miles from the house you want. This will help you determine the home’s value.
3. Every appraiser operates differently. If you feel comfortable removing the appraisal contingency because you think you have a good idea of what the appraiser will say the value is, know that every appraiser has their own thought process and values homes differently. Therefore, if the appraisal comes in much different than you were expecting, it might be helpful if you get another appraisal to determine if that value was correct.
Those are the three points to consider before removing your appraisal contingency as we enter another competitive summer market. If you have any stories to share or questions about this, don’t hesitate to reach out! You can call or email us anytime, and we would be happy to hear from you.
