Just breathe, and enjoy this "wait and see" moment." If you are using a mortgage to buy your home then the lender will require that an appraisal be conducted. Appraisals are used by mortgage lenders to ensure that the property that you are purchasing is worth the amount of the loan they are lending. The appraisal allows them to verify if anything exists on the property that can alter, devalue, or increase the value of the property. Property value is based on such factors as location, amenities, structural condition and recent sales of similar local properties. Appraisals are ordered by the mortgage lender for you. But, they will call you to obtain your preferred payment method (credit card). The cost in Anchorage is typically $750-$800 and even though you pay for it separately, this cost will be considered part of your closing costs.
The appraisal will be conducted by State of Alaska board certified and licensed residential appraisers. Appraisals usually occur during normal business hours, take no more than 30 minutes, and do not require your attendance. Instead, the seller's real estate licensee will meet them at the property to let them in and keep the home secure.
The appraiser will walk through the property, sketch the layout, and take photos. They will then use this information to compare the property to other like properties. The appraiser typically takes 7-10 days to complete their report. Your mortgage lender forwards it to you to let you know whether the property appraised at the purchase price, below the purchase price, or above the purchase price.
When the property appraises right at the purchase price, this is good, as the bank will give you a loan for the full amount of the purchase price. Nothing further needs to be done and the closing process can move forward to the next step.
If the property appraises for less than the purchase price, a few things can happen. Appraising below the purchase price means the bank will only give you a loan for the appraised value. In this case, ask to renegotiate the purchase price down to the appraisal price. If the seller says no, then you will have to come up with cash at closing for the difference between the appraisal price and the purchase price. For instance, if the purchase price is $500,000 but the appraisal only came in at $475,000 and the seller only agrees to lower the price to $480,000 then you will have to decide if you are going to bring an extra $5,000 on top of the down payment and closing costs to closing or walk away from the deal. If you walk away, your earnest money is usually refunded in the case of a low appraisal.
It is very rare for an appraisal to come in high such as the appraisal amount is over the purchase price. When it does, you should be very happy as, essentially, you now have instant equity. Occasionally, though if the home comes in significantly over the purchase price, it can cause problems as the underwriter will wonder if there was something shady going on which allowed you to get such a great deal.
Safety Code Violations
During the appraisal, the appraiser is also required to take note of any safety code violations and will specify them in the appraisal report. If they report any, repairs to these violations may need to be worked out between the seller and buyer and completed prior to the lender approving the loan. A final walk-through will afford you the opportunity to ensure that the repairs are complete.