What are your options when an appraisal comes in low?
What happens when an offer on a home is over the list price, but the appraisal for the property comes in for less than that new purchase price? In today’s market, this is a real issue. The solution depends on whether you’re a buyer or a seller. We employ various strategies to help our clients navigate this situation, which I’ll discuss below.
First, let’s cover what homebuyers’ options are:
1. The buyer can pay the difference. They can simply increase their offer or make their down payment bigger. However, this isn’t always possible if the buyer doesn’t have enough spare cash to throw around.
2. The buyer can negotiate with the seller. For example, the buyer might suggest that the seller reduce the purchase price to close the gap. This isn’t ideal, as most sellers won’t want to reduce their purchase price to appease the buyer when they can just find one who can afford to pay the difference.
3. The buyer can cancel the contract. If the seller won’t take less money for the property and the buyer can’t afford to pay more for it, then the contract isn’t going to go through.
4. The buyer can ask for an appraisal rebuttal. That essentially means they tell the appraiser that they didn’t appraise the property correctly. Unsurprisingly, appraisers don’t like to hear that they made a mistake, and I find that rebuttals tend to be unsuccessful.
But what can sellers do if the appraisal comes in lower than the purchase price? Here are a few routes they can take:
1. Sellers can decide if they’re willing to accept a lower purchase price.
2. They can negotiate with the buyer to make up the difference. From here, they can decide if they want all of the difference or just part of it. However, sellers will have a tough time finding a buyer who is willing to put up more money than initially expected to get under contract.
3. Sellers can find another buyer.
In the end, a low appraisal is a key issue that can derail the purchase process, so I highly recommend that you align yourself with an experienced agent (like us) who understands how to negotiate in these situations so that both parties can get what they want.
If you have any questions about low appraisals or about buying and selling homes in general, don’t hesitate to give us a call or send an email. We look forward to helping you.