A property appraisal is necessary when the buyer is obtaining financing on a property.  When the owner/seller is providing financing (also called “Owner Carry”) there is no requirement for an appraisal.  

Appraisals are required by financial institutions to insure that the property is acceptable collateral for a loan. Mortgage Loan-To-Values are based on the lesser of the sales price or appraised value and in most instances, the sales price is re-negotiated when the appraisal comes in below the executed purchase contract price. A Realtor assists by helping with these negotiations. The buyer is responsible for the appraisal cost unless otherwise negotiated in the purchase agreement/contract. 

The appraiser will determine an ‘Appraised Value’ by comparing the property to recently sold homes which are similar in size, form, function and amenities in the local area. 

Comparative Market Analysis (CMA) is provided by the Realtor to determine the listing price and will suffice for most sellers.  While it is uncommon, some sellers obtain appraisals for unique, unusual or high-end/upmarket properties. Please note that an appraisal obtained by the seller will not be useable for buyers who require financing. 

It is also worth noting the difference between the ‘Market Value’ and ‘Appraised Value’ of Real Estate.

  • Market Value is determined by the consumer (sales price).  What is the market willing to pay?
  • Appraised Value is determined by a non-interested third-party expert (appraisal).  How does the home compare to other similar properties?

For instance – A seller lists their home for $500,000.00 and negotiates a final sales price of $475,000 – the Market Value has now been set at $475,000.  An appraisal can then be ordered and the appraiser determines the ‘Appraised Value’ of $470,000.  While this does not necessarily change the ‘Market Value’, financial institutions will use the appraised value for lending purposes.


A property under contract/in escrow can ‘fall out of escrow’ because:

  1. The parties were unable to navigate the inspection period.
  2. The appraised value is less than the negotiated contract sales price and the parties are unable to negotiate an acceptable price.
  3. The buyer did not qualify for the loan.

The seller can accept backup offers while in escrow to protect themselves from situations like these that can cause a contract to fall ‘out of escrow’. 

To insure that contracts pass thru these milestones and on to a successful conclusion, it is important that sellers work with a diligent and experienced Realtor who has a strong understanding of the local market and only accepts contract offers from borrowers who have been ‘Pre-Qualified’ by a reputable mortgage lender. A good idea is to require the buyer to provide a “Pre-Qualification Form” on all contract offers that provides evidence that the potential buyer has the financial resources to enter into a purchase contract for this home.


Most sellers shy away from “Seller Financing” also called “Owner Carry”, but if you do not have an immediate need for the funds generated by the sale of property this may be a good option for you. Owner Carry means that the seller will finance the buyer and the collateral for the loan is the property itself. Owner Carry can sometimes lead to a faster sale and/or better sales price, because there are many financially sound buyers who do not qualify for traditional financial institution loans.

In Arizona the vehicles to do this are the Deed of Trust (used instead of a mortgage) and the Promissory Note. A Deed of Trust is the document that pledges real property to secure repayment of a loan. This document is recorded as a lien against the property. The details of the loan are usually spelled out in a Promissory Note, which is not recorded. The property is deeded by the title holder (trustor or seller) to a trustee (often a title or escrow company, or lawyer), which holds the title in trust for the beneficiary (the buyer). When the loan is fully paid, the trustor requests the trustee to issue the title by reconveyance, which transfers the title from the trustor to the beneficiary.

If the loan becomes delinquent the trustor can file a notice of default and, if the loan is not brought current, can demand that the trustee begin foreclosure on the property so that the trustor may be paid. For more information on this please visit Arizona Foreclosure Law Summary.


If you would like a recommendation for appraisers, please contact us as it is difficult to keep updated lists on this website.


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