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What If The Appraisal Comes In Low

Worried BuyerVery recently I was working with a buyer looking for her first home. We had a house under contract and had just finished the inspection when the appraisal came in. It was $18,500 less than the sale price we had under contract and we were all shocked!

Now what?

In cases like this, when the appraisal comes in low, there are several courses of action. Often, if the difference isn’t terribly much, the seller will agree to lower the sale price to equal the appraised value. Then the buyer can proceed, the lender satisfied.

If the seller sticks to his/her guns (often because they NEED to have the full amount in order to purchase the next thing they’re buying) the buyer may be asked to come out of pocket for the difference. That would mean more funds that need to be brought to the closing table. If the buyer really wants the property and is able to pay the difference, this is a viable route.

In our case, both the listing agent and I felt the appraiser chose really poor comparable properties. We wanted to dispute the appraiser’s evaluation and ask for a second opinion. The decision maker for that would be the buyer’s lender who hired the appraiser. So, I wrote an email to the lender stating our position and concern, attaching more representative comparable properties from within the same subdivision. It was sent to their escalation department and we await their decision.

It is important to give appraisers their space as they are very protected. It can’t seem like they were coerced in any way. But, their methodology may be questioned.

If we can’t get a new appraisal and none of the above scenarios work out, the buyer then has the option to cancel the contract. The standard FAR/BAR contract includes a contingencies that the contract is dependent on financing. If the buyer can’t get financed at the contract price then she can choose to cancel and get her good faith deposit back.

When you’re ready to buy or sell, know I’ll go to bat for you in any way I can! Call me if I may be of service: 407-236-6559.