What Happens if an Appraisal Comes in Low?

When the appraisal on the home you’d like to buy comes in low, you and the seller have three workable solutions to consider.
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What happens when your appraisal comes in low?  

Let’s consider this question through the eyes of a buyer. Once the inspections and repair requests are squared away, the bank will order an appraisal, which serves as a professional opinion of the home’s market value. 

The bank will send an appraiser out to the property, and that person’s job is to certify that the price in the purchase contract and the home’s actual value are in line with one another. If the appraiser can’t justify the price, it’ll either be too high or too low. 

If the appraisal ends up being higher than the offer price, there’s no issue. The buyer will receive greater equity than originally expected, and the parties can move through closing without a hitch. An appraisal that comes in low, on the other hand, can be problematic. 

One of three things will happen following a low appraisal: 

1. The seller takes a price reduction 
2. The buyer brings more money to closing 
3. A combination of the first two options  

If no agreement is reached, the contract will be rendered null and void because the buyer won’t be able to obtain the loan they made arrangements for. 

An appraisal that comes in low can be problematic.

I’ve seen it play out in different ways: I recently saw a seller take a $13,000 price cut for the sake of saving the deal. I appreciated it because I was representing the buyer in this particular transaction. In another scenario, one of my buyers made an offer on a home that appraised low. They felt that the home warranted a higher appraisal, and together we fought the appraiser on it. Despite our best efforts, the buyer ultimately chose to bring more money to the table to secure the home.   

If you’re getting ready to purchase a home and you have any questions about appraisals and how they work, please give me a call at 815-931-2279 or send me an email at [email protected]. I’d be happy to hear from you!

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