Part of buying a property includes getting an appraisal. An appraisal will let you know how much a property is worth based on local sales prices and the general market. Whether you’re looking at a residential property, apartment complex or business complex, getting that appraisal is important to understanding how much you can earn on this property over time. It affects your tax rates and other factors of property ownership, too.
The problem with appraisals is that they happen after the contract has already been designed and your negotiations have ended. Sometimes, though, if you have an appraisal performed and find issues with the property’s value, you can reopen negotiations of the contract that you previously agreed to.
Be cautious about your sales agreement to allow for renegotiation
Something to remember is that your sales agreement should allow for renegotiating your contract based on some specific contingencies. For example, if the property fails an inspection or appraises under the sales price, then both the buyer and seller should have the option to renegotiate.
What happens if an appraisal is difficult because of the type of property it is?
In some cases, there may be no other properties similar to the one that is being appraised. For example, older historical homes or a single apartment complex in an area with only single-family homes might be difficult to appraise accurately. If you get the property appraised and see a major difference between the seller’s price and the appraisal, then that may open up the opportunity to renegotiate the price and contract.
How can you protect yourself if a property hasn’t been appraised yet?
If a property has not yet been appraised, it’s a good idea to note this before you agree to any contracts. If you are going to make an offer and receive a purchase agreement, have your attorney review that document to be sure that you can renegotiate the asking price and your offer if the property does not meet the appraisal amount that you expect or were led to believe that it would. Taking some time to review the contract is important before you agree to move forward, so that the terms will be agreeable to you.