How To Handle A Low Appraisal
Low appraisals are a common occurrence in a seller’s market but, they’re a possibility in any market conditions. It can be heartbreaking for sellers and buyers when an appraisal comes in low but, it’s important for all parties to remain calm. It’s not a death sentence to the entire deal but, it will take some compromise and working together to get it resolved.
What are the options when a low appraisal comes in?
Lowering the price - when an appraisal comes in low the seller can opt to lower the sale price to the appraised value. The seller doesn’t have to opt to lower the price but, it is an option.
The buyer can make up the difference in cash- the buyer can always put more money down at closing to account for the difference in the appraised value and the agreed upon sale price.
Compromise – the seller and the buyer can work to find common ground in terms of the seller lowering the price and the buyer bringing more cash to closing to account for the remaining difference. It doesn’t have to be a 50/50 split, it can be any combination as long as both parties are in agreement to the terms.
Buyer Withdraws – a buyer that has an appraisal contingency in place can withdraw from the contract if the appraisal comes in low. This is last resort as a low appraisal doesn’t mean a lender won’t provide a loan on the home. It just means that they will only provide a loan based off the appraised value and any shortage has to be accounted for in the form of increased cash at closing, a lower sale price or a combination of the two.
Appeal The Appraisal (added after originally posted) – appealing the appraisal can be done through the lender. If there are different comps to be provided they can be submitted to the lender to then share with the appraiser. There are no guarantees the value will be changed if an appeal is made but, it can result in a successful outcome. An appeal can be necessary if an error is discovered in the report as well.
I don’t know anyone that likes receiving the news of a low appraisal but, it is something that happens from time to time. Weighing the different options to find a win-win for both sides is always possible. It just takes keeping a level head and working as a team to achieve a successful outcome.