By The Kolsky Team
The home appraisal is one of the steps in a real estate transaction that buyers and sellers often understand the least, until it affects them directly. In the Cresskill and Bergen County market, where home values are strong and buyer competition can push offer prices above asking, understanding how appraisals work and what happens when they come in low is essential knowledge for anyone buying or selling. Here is what every party to a transaction should know.
Key Takeaways
- A home appraisal is an independent professional assessment of a property's market value ordered by the lender
- In a competitive market like Cresskill, where offers frequently come in at or above asking, the gap between the accepted offer price and the appraised value is a real risk that buyers and sellers should plan for
- Appraisers use recent comparable sales in the immediate area to establish value
- Both buyers and sellers have options when an appraisal comes in below the purchase price
What an Appraisal Is and Why It Is Required
When a buyer finances a home purchase with a mortgage, the lender requires an appraisal before the loan can be approved. The lender is providing a significant sum secured by the property and needs an independent assessment confirming the property is worth at least as much as the loan amount.
The appraisal is ordered by the lender and conducted by a licensed independent appraiser who has no financial interest in whether the transaction closes. Their job is to assess market value objectively based on the property's condition, features, and what comparable properties have recently sold for. The buyer typically pays for the appraisal as part of closing costs, but the report belongs to the lender.
The appraisal is ordered by the lender and conducted by a licensed independent appraiser who has no financial interest in whether the transaction closes. Their job is to assess market value objectively based on the property's condition, features, and what comparable properties have recently sold for. The buyer typically pays for the appraisal as part of closing costs, but the report belongs to the lender.
What the Appraisal Process Involves
- The lender orders the appraisal through an Appraisal Management Company, which assigns a licensed independent appraiser
- The appraiser visits the property to assess its condition, size, features, lot, and any improvements
- The appraiser then analyzes recent comparable sales to establish market value
- The completed report is delivered to the lender and typically shared with the buyer, including the appraised value, the comparables used, and the appraiser's methodology
How Appraisers Establish Value in the Cresskill Market
The comparable sales approach is the primary methodology for residential properties. The appraiser identifies recently sold homes as similar as possible to the subject property and makes adjustments to account for differences.
In Cresskill and the surrounding Bergen County communities, this process can be nuanced. Cresskill is a relatively small borough, and the supply of truly comparable recent sales is sometimes limited, particularly for larger or more distinctive homes. When comparables are not available in Cresskill proper, appraisers may look to adjacent communities including Closter, Demarest, Tenafly, or Englewood Cliffs for relevant data points.
In Cresskill and the surrounding Bergen County communities, this process can be nuanced. Cresskill is a relatively small borough, and the supply of truly comparable recent sales is sometimes limited, particularly for larger or more distinctive homes. When comparables are not available in Cresskill proper, appraisers may look to adjacent communities including Closter, Demarest, Tenafly, or Englewood Cliffs for relevant data points.
What Appraisers Evaluate in the Cresskill Market
- Interior and exterior condition of the property, including updates, improvements, and any visible deferred maintenance
- Square footage, bedroom and bathroom count, and overall layout compared to available comparable sales in Cresskill and surrounding Bergen County communities
- Lot size, location within the borough, and features that affect desirability such as views, privacy, or proximity to parks and commuter access
- Recent comparable sales, typically within the past six to twelve months
What Happens When the Appraisal Comes In Low
An appraisal below the purchase price creates a financing problem. The lender will only loan against the appraised value, which means the buyer is responsible for covering the difference out of pocket in addition to their down payment.
In the Cresskill market, where competitive offers can push accepted prices above asking, the appraisal gap is a genuine risk. When the appraisal comes in low, buyers and sellers typically have several paths forward.
In the Cresskill market, where competitive offers can push accepted prices above asking, the appraisal gap is a genuine risk. When the appraisal comes in low, buyers and sellers typically have several paths forward.
How Buyers and Sellers Can Respond to a Low Appraisal
- The seller reduces the purchase price to the appraised value, which is often the most straightforward resolution
- The buyer covers the appraisal gap and pays the difference between appraised value and purchase price in cash, in addition to their down payment
- The parties negotiate a middle ground; the seller reduces partially and the buyer contributes the remainder to close the gap
- The buyer invokes the appraisal contingency if the contract includes one, and the buyer can exit the transaction and receive earnest money back if the appraisal comes in below a specified threshold
Protecting Yourself as a Buyer or Seller
For buyers in Cresskill, the most important step is understanding the appraisal contingency in their offer and what it does and does not protect them against. In multiple-offer situations, buyers are sometimes asked to waive the contingency or commit to covering a specific gap.
For sellers, a pre-listing appraisal ordered before the property goes on the market can provide a defensible pricing data point and a reference if a buyer's lender appraisal comes in differently. It does not guarantee the buyer's lender will arrive at the same number, but it is useful context in a negotiation.
For sellers, a pre-listing appraisal ordered before the property goes on the market can provide a defensible pricing data point and a reference if a buyer's lender appraisal comes in differently. It does not guarantee the buyer's lender will arrive at the same number, but it is useful context in a negotiation.
For Buyers
- Read the appraisal contingency in your offer carefully and understand the specific threshold at which it can be invoked
- If asked to waive the appraisal contingency in a competitive offer situation, calculate the maximum appraisal gap you could cover in cash before agreeing
- In multiple-offer situations where an appraisal gap commitment is expected, put a specific ceiling on what you are willing to cover rather than waiving the contingency entirely
- After a low appraisal is delivered, request the full report and review the comparable sales used
For Sellers
- Consider a pre-listing appraisal before the property goes on the market
- Price from recent comparable sales data rather than from the top of the range
- If a low appraisal arrives after an accepted offer, evaluate the buyer's contingency terms before deciding how to respond
- Document all recent improvements with costs and permits before listing
FAQs
Can a buyer dispute a low appraisal?
Yes. If the buyer or their agent believes the appraiser used inappropriate comparables, missed improvements, or made errors, they can submit a formal reconsideration of value to the lender with supporting documentation including alternative comparables. The lender forwards the request to the appraiser, who reviews it. Appraisers are not required to change their conclusion, but material errors or overlooked data can result in a revised value.
How long does an appraisal take in the Bergen County market?
The appraisal visit typically takes 30 to 60 minutes. The completed report is usually delivered to the lender within five to ten business days of the visit, though timelines vary depending on appraiser availability and property complexity.
Does a cash buyer need an appraisal?
No. Appraisals are required by lenders to protect their loan. Cash buyers are not required to obtain one, though some commission an independent appraisal for their own peace of mind.
Contact The Kolsky Team Today
Whether you are navigating your first purchase in Cresskill or selling a home you have owned for years, understanding every step of the transaction makes a meaningful difference. We are here to help.
Reach out to us, The Kolsky Team, to connect and get started.
Reach out to us, The Kolsky Team, to connect and get started.
