For many buyers, an accepted offer is a sigh of relief; you’ve seen tens to hundreds of homes, you’ve jumped through hoops to get financing, and you’ve finally agreed upon a sales price. So the home is yours, right? Wrong. Unfortunately, for many buyers, the real work begins after the offer is accepted, and until you’ve closed and been handed the keys, the house isn’t yours quite yet.

Since the real estate bubble burst, many lenders are much stricter with their lending guidelines. Here are a few things that can get in the way:

The Appraisal – An appraisal can quickly kill a deal, since lenders want to know that the home you’re buying (with their money) is worth what you’re willing to pay for it. For the most part, home buyers rather not overpay for a home themselves, but at times, they can get carried away in a bidding war, or if they feel they’ve found their “dream home.” An appraisal is used to protect the lender, since the home can easily become their responsibility in the event of a default and then foreclosure. Lenders are particularly picky about appraisals since the market crashed, since their holding onto an estimated one million foreclosed homes, and growing. An appraisal is similar to a comparative market analysis (CMA) that your Realtor can perform*, since they use recent sales in the neighborhood to determine your home’s actual value. Since the appraiser is hired by the lender, they can often times be on the conservative side, to ensure that the lender will not lend more than the Denver Colorado homes for sale are worth. Problems with appraisals do arise, and these statistics help illustrate the growing trend:

  • One survey noted that three-fourths of agents surveyed blame low appraisals for being an issue in their buyers getting financed.
  • Recently, ten percent of the National Association of Realtors’ members have had a deal completely ruined by a low appraisal and another 10% reported that appraisals caused delayed closings.

Luckily, the up side to an appraisal is that the seller may agree to drop the sales price after a low appraisal comes back. The reason they would do this is because the buyer would either have to come up with the money out of pocket, or the deal can die. Most sellers understand that if one appraisal can kill a deal, others in the future can as well, and take the appraisal as a sign that they’re priced to high.

*Please note that an appraisal and a CMA are not the same, an appraisal must be performed by a certified appraiser.

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