Most home buyers take advantage of the home appraisal when they buy a new home, however, others toss the notion aside, especially when the market is hot, and that’s not a very wise decision when putting so much into something so valuable.

If you’re looking to use mortgage financing, it’s hard to overlook an appraisal. Now, many buyers, trying to compete with other purchasers, may waive the appraisal, but they will still have to have an appraisal to get financing. It just means that once the appraisal is completed, regardless of the final number, they will still walk toward the closing table.

Here’s a question: Why would you write a contract on a house for $440,000 when a professional appraiser warrants that it’s only worth $425,000? Yet such actions have become so common in some markets that Realtors even have a disclaimer form that they provide for buyers saying they have been informed of the dangers of waiving the appraisal – and yet, buyers still sign it and move along.

Waiving the appraisal is a dangerous way to buy a house. If all goes well then nothing bad happens. The buyer gets the house and thinks all this disclaimer stuff and warnings are from a bunch of nervous real estate agents who don’t like to take risks. But, what if everything doesn’t go so well? You could perhaps lose half of your money because the appraisal didn’t come in high enough for you to even get the financing.  As well, the seller demanded the deposit to pay for the lost marketing time and the money he has now has to be put out for more payments, insurance, etc., to put the house back on the market because the buyer wrote a contract he can’t fulfill.

The result is either a lawsuit (and we’re not talking small claims court); trying to renegotiate the sales price (good luck); moving forward by finding even more money to pay for the inflated price agreed upon (which is usually what happens); or taking the hit on your deposit and finding another house – except, now, with less money in your pocket than what you had before.

Related posts:

  1. The Role of the Appraisal
  2. Time to Make an Offer
  3. Get a Good Appraisal