What to do When the Appraisal is Less Than What's Offered

If you appraisal was way lower than you expected, don’t worry. This can happen for a multitude of reasons, and it doesn’t have to be a deal breaker. Yes it is a defeating feeling when you finally find your dream home, get an offer accepted, and then, the house doesn’t appraise for the agreed-upon price.

It can infuriate you when the deal falls apart because of the appraisal, but just relax. This happens more than anyone likes to admit, but sometimes corners are cut to make the deal happen.

If the appraisal is less than your offering, you will probably need to come up with more cash, but this isn’t your only option.

Look over the appraisal contingency clause: Most appraisals have built in contingency clauses, meaning you can look at the situation and possibly renegotiate. I am not saying this will save the deal, but it’s very possible you could spend more money than planned or even walk away from it all.

Sometimes it’s necessary that all parties need to stick together and find a mutual deal. Sellers might need to come down on their price; you pay the closing costs, and agents lose a little commission, but the deal will still go through.

Get a second opinion: Maybe the appraisal needs a second opinion and needs to be redone. The appraiser should review your appeal, and counter by explaining why they didn’t use comparable sales that the lender sent. Sometimes the seller will pay for the second appraisal to keep the deal alive. The lender might even be willing to pay for the second appraisal.

In order to avoid a low appraisal, make sure you tell the appraiser why you made the offer you did. This is where the agent should meet the appraiser and show them comparable sales and listings.  

Try not to pay more than the appraised value: Do not get emotionally attached to this house even if it is your dream home. Distance yourself incase this falls through leaving you hurt and sore. Don’t pay more than the appraisal, because if you do, you’re paying more than the value of the actual house.

Forget the fact you’re in a hot market: Even when some buyers pay more for hoses in hot markets, keep in mind you’re not the only one sitting in this boat. Even in hot markets, the sellers freak out when the appraisal comes in lower than expected. Unless the buyer has cash on hand to pay right then and there, you can use this low appraisal as leverage to renegotiate.

Even if you’re not in a hot market, the seller will usually take their price down and sell for the appraisal amount. Once all parties are fixated on a deal, they do almost anything to make it work.

Hope this has shed some light on what to do in this scenario. Good luck!

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