Having an appraisal come in lower than expected can be stressful, but it’s not the end of the world! Overpricing occurs in every market condition for many reasons. An abundance of foreclosures in the neighborhood, an over-inflated asking price, and incorrect pricing by the underwriter can all contribute to this awkward situation. But what should you do when the price comes back below expectations?
You may request a value appeal to have the appraiser review their reasoning for not using the similar sales sent by the lender. There may have been an oversight by the appraiser, especially during the busiest seasons.
You can also coordinate with your lender to arrange a second appraisal. Hopefully, you can receive a higher valuation.
If the home’s price was too high to begin with, it’s usually easiest for all parties involved to simply lower the asking price to reflect the low appraisal.
If the appraisal is lower than expected, the buyer may not qualify for the terms in the loan contingency, making them ineligible for the purchase. As long as the purchase contract has been written carefully by a professional, this will require the seller to return the buyer’s deposit upon cancellation.
Of course, each situation is unique and is best navigated with the help of an experienced lender and realtor. Contact me if you have questions!
A lot of sellers right now are all excited about the thought of receiving multiple offers on their home, thus driving up the sale price. This sure sounds like a good deal, but there is one real deal breaker lurking – the appraisal.
The appraisal is a tricky thing. If your buyer is getting an FHA loan, that appraisal will stick with your home for the next six months. This means, if it comes in low, that will be the appraised price for any other FHA buyer for the next six months. If you lose the buyer because of the low appraisal you need to either lower your price or find a buyer with conventional financing or cash. A buyer with a conventional loan may also run into a low appraisal but it will not be stuck with your home like an FHA appraisal.
Do you have other options if the appraisal comes in low? You sure do! You can keep that buyer and just lower your price to the appraised value. The buyer may be able to bring more cash to the table, or you may have a combination of those two options.
Because of the low inventory levels, buyers are ending up in multiple offer situations all the time but that does not necessarily mean your home is worth more money.
Appraisals, some blame appraisers for part of the housing market crash and now they are catching heat again for blowing up sales. In order for the buyers to get their financing, the home they are buying has to appraise for the amount on the purchase agreement. Right now the housing market is starting to rebound causing multiple offer situations which drive the price of a home up. According to the National Association of Realtors, 33% of appraisals in May 2012 came in BELOW the price on the purchase agreement. Evidently, many appraisers are not correctly recognizing the increase in home prices. If the appraisal comes in too low there are basically 2 options, lower the purchase price which the buyers don’t mind but the sellers are not happy with or try to have the appraiser make an adjustment which does not happen very often. It is the duty of the appraiser to find the correct value for your home in the current market but it is also your job as buyers and sellers to make sure that the price offered is also a fair price in the current market. Moral of the story is that when the purchase agreement is signed and the inspection is finished, the sale is still not done until the appraisal comes in.