Buy a House in Colorado – Appraisal

This is the seventh post in a series for people wanting to buy a house in Colorado. I’ve already covered Getting the Loan, Finding the House, Offer/Counter Offer, and Inspection and Negotiation. Read the first post, and find links to the rest of the series here.

If you’re getting a loan to buy your house, your lender will require an appraisal, which you will pay for. Appraisal is one of the standard contingencies on Colorado’s Contract to Buy. Appraisal is one of the protections for the buyer, but it can be totally annoying, because the process is highly regulated and the ‘person’ who really wants to be protected is the lender. It’s a business decision for the lender, and the appraiser won’t have ‘fallen in love’ with the house like you might have.

So it’s one of those times when you’re invested in the house emotionally and financially (if youve done the inspection), and the outcome is out of your hands.

There’s two deadlines relating to appraisal – the Appraisal Deadline and the Appraisal Objection Deadline (found on line 9 and 10 of the Contract to Buy).

Your lender will order the appraisal once you or your agent gives them the go-ahead. That’s after you’re under contract on a house, and often after inspection. It can take two weeks for the appraiser to get the appraisal completed, and that must happen by the Appraisal Deadline.

If the appraisal comes in at or above the sales price of the house, you should notify your agent and you don’t have to do anything else.

But the appraisal may come back with some contingencies of its own. For instance, the appraiser may require certain appliances to be in place, peeling paint on older homes to be scraped and painted over, or other safety measures addressed. These are things the seller would have to take care of, and if the seller is a bank they may be unwilling (in fact, any seller may be unwilling or unable). At the very least, items like these can add days or weeks to the time until you can close.

The appraisal may also come back lower than the sales price of the home. In that case, the seller may agree to the lower price, but they don’t have to. If you still want the house, another option may be to bring more cash to cover the difference. But not many people choose to do that in a declining market.

In either of these cases, you may choose to terminate the contract, which must be done in writing and before the Appraisal Objection deadline.

But to tell you the truth, the appraisal value shouldn’t come in drastically lower than you expect. Your agent should have done a market analysis of the home before you even made your offer. And you would probably have seen a few houses, enough to get a feel for a fair price. The totally annoying thing is when it comes in only a few hundred dollars lower and the seller won’t budge. It’s a real shame for a home purchase to go south over a few hundred bucks.

I write posts on real estate issues and local events in the Denver metro area, especially those *communities between Denver and Boulder, as a public service. My hope is to give people an idea of the ‘flavor’ of our community, in case they’re new or moving to the Denver area.

I am a residential real estate agent, happily helping folks buy a house or sell a house in the beautiful and friendly *suburbs northwest of Denver.

*Arvada, Broomfield, Westminster, Thornton, Golden, Wheat Ridge, Northglen, Lakewood
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