A question many homeowners and sellers have are what appraisals really mean and how will it affect one’s ability to make a deal.

Many home sellers find themselves in a very difficult situation whenever the market plunges and continues to struggle across the nation. An agent will have a buyer lined up and then begins to offer services. However, the buyer’s financing has now fallen through. Now the asking price of the home has come in over the appraised value. This event has led to an unusually great number of contract cancellations. The National Association of Realtors (NAR) stated that, ), “Twenty-one percent of NAR members in January reported delays in contracts, and 33 percent said contracts fell through.. The number of contract cancellations remains mostly unchanged from December. An increase in the past year of contract cancellations or delays has been blamed on more lenders declining mortgage applications from stricter underwriting standards and low appraisals coming in under the agreed upon contract price.”

Here are a few facts about appraisals:

• It is a fact that lenders won’t usually write a mortgage beyond what the home is “worth”, thus setting them up for a great financial burden if the potential buyer choose to default on their loan. Instead, lenders will write a mortgage for whichever price is less, may it be the sale price or the appraised value, and yes, from a business standpoint, this is logical. This is absolutely frustrating for a stalled and unpredictable housing market.

• An appraisal is presumed by your local tax office; they compute your home’s market value based on the square footage and particulars of your home such as a fireplace, hardwood floors, and four bedrooms, etc. Homes with these particulars will be taxed higher and  at the same time, will be appraised higher  compared to the same home with none of these particulars.