What Happens if Your Home Appraisal Comes in Low?

What happens if your appraisal is less than the purchase price when you are trying to sell your home? When a home purchase is financed by a mortgage loan there will be an appraisal but the big question is: What happens when the appraisal comes in below the price you and your buyer have agreed on?A low appraisal is one of the top reasons home sales fall through but this doesn’t have to be the end of the line for your real estate deal. There are several options or ways you can handle this awkward gap that’s presented itself.Reduce Your Sale PriceThis is the quickest way to settle a low appraisal because it allows you to forgo any further negotiations with your buyer and their agent. However, this could mean leaving money on the table.

Your Buyer Covers the Difference

If you have a committed buyer and they have enough cash to cover the difference between the appraisal and the selling price you’ve agreed on, then you can have the buyer add it to the down payment. In this case, the lender should be satisfied.

Meet Each Other Halfway

If you both decide you want the sale to move forward, it may make sense to meet in the middle and split the difference. Drop your price a bit and have the buyer add cash to the down payment.For example, if the sale price were $400,000 and the appraised value came in at $390,000 ($10,000 less) you should lower the price to $395,000 and the buyer should bring another $5,000 to closing.

Challenge Your Appraisal

If the value falls short, the buyer does have the power to request a review or a second appraisal. As the seller, you can support your buyer in their efforts by sharing the results of your own appraisal if you have one.Challenging the appraisal can be a long shot but it may be worth it if you feel it was really off the mark. Keep in mind as well that this can backfire, and the value could come in even lower with a more in-depth review.

Move On And Put Your Home Back On The Market

If your buyer can’t put more down and you’re not interested in reducing the price, it may be time to cut your losses and let the deal fall through. This also depends on what type of contingencies your buyer wrote into the contract. It’s not uncommon for buyers to write an appraisal contingency into the purchase agreement, allowing them to back out if it comes in too low. In this case, you may have no choice but to put your home back on the market unless you’re willing to lower the price.The risk of a low appraisal is one reason sellers favor cash offers. In that scenario, there is no appraisal. Plus if you put your home back on the market and get another buyer even without a cash offer, another lender’s appraiser could come out to be closer to your price.For help with all the nitty-gritty in your home sale, team up with a First Team real estate agent. They’ll help you negotiate, work through minor and major hiccups during the process and get you through your home sale on top. Find an agent online or reach out and we’ll find a top producing agent in your area for you.