Whether you’re buying or selling a home, an appraisal that comes in lower than expected is generally not ideal. However, a low home appraisal doesn’t have to mean “game over.” Only about 10% of home sales that fall through can be attributed to a lower-than-expected appraisal. There is a good chance, then, that you’ll be able to overcome the hurdle of a low appraisal and proceed with the sale or purchase.
Before we explain your options, let’s look at some of the reasons why your home appraisal may have come in lower than anticipated:
» Is it a seller’s market? Bidding wars are driving home sale prices higher than an appraisal can support.
» Is it a buyer’s market? Foreclosures in the neighborhood can drive values down, and oftentimes sellers aren’t even aware that their home’s value has decreased!
» Is your appraiser up to snuff? It’s so important to hire an experienced appraiser who knows the intricacies of your local market, and who is keen to consider the upgrades you’ve made to your home, as well as its valuable features or amenities. At Appraisals Unlimited, our appraisers are highly experienced, detail-oriented, and incredibly knowledgable about the real estate markets they service.
» Apples to apples or apples to oranges? There is a chance your home is being compared to homes that aren’t a great match for it. Hiring an experienced appraiser can prevent this issue from arising.
» You’ve already negotiated a closing cost credit. This would mean your purchase price is higher to account for the cash back you’ll receive at closing, but the appraisal can’t support that higher cost.
Now that you know why your home—or your home-to-be— has been appraised at a lower value than expected, it’s time to discuss what your options are as a buyer:
1. Make up the difference in cash.
2. Pull money from the downpayment to make up the difference…but consider that if your downpayment is less than 20%, you’ll need to pay private mortgage insurance until the load-to-value ration comes back down to 20%.
3. Appeal the appraisal. If you believe your appraiser used suboptimal comparisons or failed to consider important assets or upgrades in the home, you can ask the lender to appeal the appraisal.
4. Back out of the sale or purchase. If you signed an appraisal contingency, you can cancel the contract and walk away from the sale, no questions asked.
What if you’re the seller? Then what are your options?
1. If you feel like the appraisal is inaccurate, request a copy of the appraisal. You may find an error that changes everything!
2. Ask the buyer to challenge the appraisal. Be prepared to provide documentation—receipts, comps, market information, etc.—that will support a higher value for your home. Explain exactly which points of the appraisal don’t sit right with you.
3. Be willing to negotiate. Chances are the buyer wants the deal to pan out as much as you do, so be willing to engage in some back and forth that would make the home sale a mutually beneficial transaction.
4. Cancel the sale, and re-list your home once market conditions improve.
Of course, most of this headache can be avoided by hiring an experienced appraiser who has their fingers firmly on the pulse of your local market. At Appraisals Unlimited, we offer residential and commercial real estate appraisals throughout New England and New Jersey. When you work with us, you’ll gain peace of mind knowing that your appraiser is a master of their craft. You’ll also reap the benefits of personalized customer service and an easy-to-reach team that is available to answer your questions and address your concerns at almost any time of the day.
Contact Appraisals Unlimited to learn more about what we offer, or order an appraisal today!
If you have an immediate need for a commercial or residential real estate appraisal, contact us today! We are the most trusted appraisal company in New England and New Jersey, performing more than 10,000 appraisals every year!
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