You’re in the thick of things now. You’ve gotten pre-approval from the bank, you’ve hunted down the house you want, you’ve signed the purchase agreement and now you’re dealing with a home appraisal before the bank officially approves your loan.


The Basics

Before we get to the negotiating tips, we need to understand how the appraisal process works. You wouldn’t start playing a game of football without knowing the rules, right? Understand first, play to your advantage after.

Your loan lender chooses an appraiser from your area to assess an opinion of value, or rather, how much the house is worth. This appraiser is a licensed and certified professional who is unbiased – they do not represent you or the seller. This is done so that the home receives an objective financial value. Appraisers survey the house in person, taking in the location of the home, its age, its condition, its additions/renovations and the recent sales of comparable homes nearby to determine value. Home buyers generally cover the cost of an appraisal, where the fee is included in the closing costs. The fee can vary greatly here in Saskatchewan, you can be paying anywhere from $200 - $400.


The Tips

Even though the cost is generally covered by home buyers, it never hurts to ask if the seller will cover it. This is where your charismatic Realtor can shine. ;)

 One of three possibilities can happen when you finally receive the valuation:


The valuation matches the price you and the seller agreed upon. This is the ideal situation – your lender can proceed with the underwriting of your loan.


The valuation is higher than the price you and the seller agreed upon. You’ve gained equity, just like that! This is more of a rare occurrence.


The valuation is lower than what you and the seller agreed upon. There’s a shortfall in cost, and your lender will only pay the appraisal amount.

If your appraisal comes in low, this is where your realtor offers their recommendations on how to proceed, based on your specific situation. If the low value has to do with the appraiser, you can appeal the valuation. This where you would work with your agent to research similar homes that support the sale price you agreed with the seller on. You present this evidence to the lender, and they submit it to the appraiser for a re-evaluation. The appraiser decides on whether or not to revise their valuation, though. Alternatively, you can ask your lender for a second appraisal. You’ll pay out of pocket for this one, and there’s no guarantee that the second valuation will be higher or meet the sales price. You’re more likely able to challenge an appraisal for a conventional loan than a government loan. You would need solid facts to back it up in either case.

 Your best tip, regardless of the low value being due to the appraiser, listing agent or seller, is to persuade the seller to lower the sales price, or to split the difference between the home’s appraised value and the agreed sales price with you. Again, this is where your Realtor comes in. It’s their job to negotiate for you. Once decided, your lender can get your loan going.


Fun fact: A valuation and an evaluation are not the same thing. A valuation is an estimate of something’s worth. An evaluation is an assessment or summary of a particular place, event, situation, person or thing.


With the appraisal behind you, and your loan in the underwriting process, you can look forward to that closing stage.

You are closer to getting those keys!

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