An appraisal is a critical piece of the home buying process because it establishes how much the lender will allow you to borrow to purchase the property. Because an appraisal determines the value of a property, a lender will not lend more than the value outlined. When an appraisal comes back lower than expected – meaning lower than the current listing price – it can be problematic for both the buyer and the seller. However, there are some steps you can take to resolve this unfortunate situation.
Re-Negotiate the Asking Price or Put More Money Down
As a buyer, when an appraisal comes back low, your first step will be to try to re-negotiate the asking price with the seller. In cases where the appraisal is just slightly lower than the asking price, this may be the easiest route to take for both parties. However, if there is a significant difference, the sellers may not be willing to reduce the price of the home. In this case, the seller may be looking to improve the property through home maintenance and repairs to boost the appraised value or simply wait for the right buyer to come along – the buyer who loves the property so much that they are willing and have the funds to pay the difference between the appraisal and the asking price out-of-pocket. This essentially means putting down a larger down payment on the home as the lender will not provide a loan amount for more than the home is worth.
Order a Second Appraisal
Your other option is to request a second opinion. If you believe a low appraisal is inaccurate, you’re allowed to order a second appraisal. It’s possible that the first appraiser was inexperienced or missed certain aspects of the property for whatever reason which resulted in the low appraisal. Hopefully a second appraisal will remedy these mistakes and come back with a more accurate estimated value of the property.
If Neither of These Steps Worked…
If neither of the above steps worked to either bring the property’s asking price down or increase the appraised value, both yourself and the seller may have to make some tough decisions. As mentioned above, the seller still does have the option to improve the home to boost the appraisal, however, as a buyer, you may not have the flexibility to wait for the upgrades to be made. Unfortunately, if you are unable to come to an agreement with the seller and are unable or unwilling to pay the difference in cash, at this point it may be time to walk away from the sale. Your personal situation or preferences will determine if a low appraisal is a deal breaker for your transaction.
Our Warp Speed Mortgage team is experienced with these situations and will work hard to keep the home buying process moving forward while also helping you to weigh your options. Lean on their experience. While this situation won’t happen for many homebuyers, lenders deal with this scenario regularly.
While a low appraisal can make the road to buying a new home a bit more complicated, it’s important to keep in mind that there are some remedial actions you can take to save the sale, like re-negotiating the asking price or getting a second opinion. While the home buying process can come with some twists and turns, there’s nothing like walking into your new home! If you’re ready to begin your home financing journey, get started today!
