Surviving the Low Appraisal: A Guide for Home Buyers and Sellers
In the wild world of real estate, there’s nothing quite like the sinking feeling of receiving a lower appraisal than the contract purchase price. Buyers sweat, sellers fret, and both parties scramble to figure out what to do next. Luckily, we’ve got the scoop on how to handle these appraisal curveballs, so you can emerge from the chaos unscathed (1, 2).
First, let’s understand the role of an appraisal in the home-buying process. An appraisal is an unbiased professional opinion of a home’s value, typically requested by lenders to ensure that the property is worth the loan amount (3). When an appraisal comes in lower than the agreed-upon price, buyers may not secure financing, and sellers may have to renegotiate (4).
Fear not, dear readers, for we have compiled a list of actions you can take to navigate these murky waters:
- Review the Appraisal Report – Make sure there are no errors, such as incorrect square footage or missed recent sales (5). If you find discrepancies, request a reconsideration of value (6).
- Negotiate the Price – Both parties can agree to meet in the middle, or the seller can lower the price to match the appraised value (7, 8). Buyers should be cautious not to overpay for a property, as it could impact future resale potential (9).
- Seller Concessions – Sellers may offer to pay for closing costs or make repairs to sweeten the deal for buyers (10). This could help offset the appraisal gap without changing the contract price.
- Appraisal Gap Coverage – Buyers can add a clause to their purchase agreement that allows them to cover the difference between the appraised value and the agreed-upon price (11). This may require a higher down payment or additional cash reserves (12).
- Order a Second Appraisal – If the first appraisal seems inaccurate, either party can order a second appraisal, though the cost will typically fall on the buyer (13).
- Change the Financing – If the buyer’s initial financing falls through, they can explore alternative loan options, such as portfolio loans, which may not require an appraisal (14).
In conclusion, low appraisals can be a gut punch for both buyers and sellers, but armed with the right knowledge and tactics, you can overcome this hurdle and salvage the deal.
Sources: (1) https://themortgagereports.com/12508/my-home-appraised-too-low-appraisal (2) https://www.thebalancemoney.com/how-to-deal-with-a-low-appraisal-1798414 (3) https://propertyclub.nyc/article/what-happens-if-the-appraisal-is-lower-than-the-buyer-s-offer (4) https://www.forbes.com/advisor/mortgages/home-appraisal-lower-than-offer/ (5) https://www.rockethomes.com/blog/home-buying/what-happens-if-appraisal-is-lower-than-offer (6) https://flagency.net/how-to-avoid-handle-low-appraisal/ (7) https://www.upnest.com/1/post/low-home-appraisal/ (8) https://wellingtonhometeam.com/what-happens-if-a-home-doesnt-appraise/
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