Your lender orders an appraisal on the condo you are buying to make sure they don't loan more money than the property is worth.
The fact that the lender hires the appraiser doesn’t mean you play no role in the process. You're still responsible for getting all applicable condominium documents to the lender. You should also verify the accuracy of an appraisal that comes in below market value.
Provide condo-specific documents to lender
Prepare for an appraisal by providing the documents that will tell your lender about the financial health of the homeowners association — it affects the condo's value. The faster you get these to your lender, the sooner you can close on the condo.
- List of recent renovations
- List of amenities
- HOA bylaws
- HOA regulations
- HOA budget
- Monthly fees
- Details on special assessments
- Reserve fund statements
- Information on the community’s common areas, exterior infrastructure and amenities
- Copy of condo community’s insurance policy
Know timeline and cost
The appraisal is paid by the buyer even though the lender orders it. It is typically covered in the closing costs.
- Expect to budget about $500
- Expect to get a report in a week or two
- The estoppel certificate — which details to the buyer whether the seller owes any fees to the HOA and what the buyer will be charged — usually expires in 30 to 60 days and may have to be updated if the closing is delayed
What if the condo's appraisal comes in below the purchase price?
An appraisal for less than you’re paying for the condo isn’t the end of the world. There are steps you can take to save the deal if you think it’s worth saving. Keep in mind, though, that there’s likely another deal if this one falls through.
- Review the appraisal for accuracy
- Hire another appraiser
- Negotiate with the seller to accept less than the asking price
- Consider paying the difference between the loan and appraisal
- Walk away from the contract if you don't want to or can't cover the difference between the purchase price and the appraisal