Dealing with a Low Appraisal
By Victoria Hunter
Photo © Yuri Arcurs - Dreamstime
After months of readying the house for the market and negotiating back-and-forth with buyers on the sales price, sellers are shocked if the appraisal of their home comes in below the offered price. Sadly, as the market rebounds, and home prices begin to inch up, low appraisals will be happening all too frequently. So, how can you avoid a low appraisal and what are your options if you get one?
Avoiding a Low Appraisal
The most important step you can take in avoiding a low appraisal is setting the price right the first time. No matter how much money you want to get, or hope to get, the bottom line is that it is the buyers in the market, not the sellers, who set market value. So, what if the worst has already happened and you are faced with a low appraisal? There are several steps you can take to attempt to remedy the situation.
Appraise the Appraiser
Appraisers have been known to make errors. For instance, are all of your bathrooms listed? Is the square footage reflected accurately? Have your agent check the comps the appraiser used to compare to your home. There could be errors there as well. If you've made improvements to the home be sure those were taken into account by the appraiser. |
Lower the Price
If the appraisal seems accurate, the next item to consider is your sales price. If it's too high consider renegotiating the purchase agreement with a lower price, reflective of the appraised value.
Increase the Down Payment
The buyer can pay the difference between the purchase price and what the bank will lend. If the buyer really wants the home, and is financially able to do so, increasing the down payment will bring the sales price in line with the appraised value. There is a danger in this though. Paying more up front will create negative equity in the home (the amount of the loan plus the larger down payment is greater than the appraised value of the property) and the loan may not be approved.
Challenge the Appraisal
A seller, or listing agent, may be able to convince the appraiser to reconsider his or her evaluation of the home. If the seller has information on the circumstances behind a recent low sales price in the area, such as death or divorce, this should be shared with the appraiser. This information can go a long way in convincing the appraiser to reconsider. Remember, the appraiser doesn't live in your neighborhood; he or she may not know the area very well and will most likely welcome your “insider” input.
A low appraisal doesn't have to be a deal killer. Before the buyer decides to walk away, be sure you've done all you can to remedy the appraisal and get the sale back on track. |
