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As the housing market continues its climb, low appraisals are more and more common since closed sales prices aren’t supporting new sale amounts.....
If an appraisal comes in below the sales price, a buyer will need to pay the difference to the seller out of pocket. Below are some other options you may want to consider:
Renegotiate the Contract - maybe the seller will reduce the purchase price to match the appraisal in order to make the deal work. But be realistic in your ability to get this done, especially in a rapidly-moving housing market.
Cancel the Contract - if the seller won’t renegotiate, be willing to walk away. Your contract contingencies likely allow you the right to do so in the event of a low appraisal.
Challenge the Appraisal - your lender should have a process for an appraisal rebuttal. First look for factual errors with the data presented. Then look for omissions such as better comparable sales, upgrades, etc.
Order a New Appraisal - if you feel it’s not worth challenging with the same inspector, you can always get a new appraisal. But it will cost you another appraisal fee, so make sure you have justification and that it’s not just a shot in the dark.
Here are some preemptive moves if you feel a low appraisal is possible:
Accept Cash Offers - cash buyers don’t need financing, eliminating the need for an appraisal since there’s no bank requiring a check on the value of its collateral (the home).
Document Improvements - provide an appraiser with details that’ll help support a higher value. Think about items that aren’t easily visible, like updated heating and cooling units, or energy-efficient windows.
Keep It Clean - while an appraiser doesn’t value a home based on cleanliness, it can’t hurt. “Curb appeal” makes things feel more valuable. So trim that yard and clean those windows; it makes a good impression on an appraiser.
To learn more about how appraisals work, click here.