Purchasing a home is an exciting journey! Once you choose to purchase a home, you should feel confident about moving forward. However, what if the home you are looking to purchase does not appraise? Appraisals are a necessary step in the home buying process. If the home doesn’t appraise for the value the seller is asking, it can deter lenders from loaning you the money needed. Your lender has a vested interest in the home, and they want to ensure that the house is worth the money they are going to lend you. In the end, both your mortgage and your contract could be affected.
Although this news seems discouraging, there are some options you should consider to help you move forward and make the right decisions throughout this process:
Scrutinize the Appraisal. Your first step should be to scrutinize the appraisal. Search for any issues or anything that the appraiser may have overlooked. Don’t hesitate to seek our guidance to help you find comparable sales.
Request a Second Appraisal. If you feel that the appraisal was not done correctly or was priced too low, request a second appraisal and dispute the first. Look for similar properties in the area and make a list of comparable sales. These comparable sales are key in helping dispute appraisals. No matter how many times you have the home appraised, different appraisers often come up with different results. There are also situations where the appraiser is not from the area and does not appraise the home at local market value. Take your list of comparable sales to the lender to show a reasonable need for re-appraisal. This will probably cost extra money but may be worth it in the end.
Negotiate the Price. Work with the seller and negotiate a price that is consistent with the appraisal. They may be willing to take less money to get the house sold. It doesn’t hurt to ask! If they won’t drop the price all the way to the appraisal value, ask for a reduction that helps you meet in the middle. Work to find a solution that benefits both you and the seller. They want to sell the home as much as you want to buy it.
Pay the Difference. If you have the extra cash at your disposal, consider paying the difference between the appraisal value and sales price. Most lenders will still be willing to loan money with a low appraisal, however, they will reduce the amount to match the appraisal value. If you are unable to pay out of pocket, consider talking with your lender. They may have other mortgaging options that will work better in this situation. Again, it doesn’t hurt to ask!
Cancelling. Once the low appraisal comes in, you may decide to cancel the contract. This should be your absolute last resort. You have already invested so much time, effort, and money into this home. Before you walk away, be sure you have considered every option. If walking away is the best option for you, most contracts have appraisal contingencies built in that allow you to walk away from the home if the appraisal value does not match the selling price. These contingencies allow you to be released from the contract without penalty if you are unable to receive financing for the home. If you are unable to reach middle ground the with the seller and lender, you have the option to walk away from the home without losing any deposits made. Again, this should be a last resort. Work to find a beneficial solution for both you and the seller.
While news like a low appraisal on the home you are trying to purchase can be discouraging, don’t let it stop you from getting your dream home! Consider all of the options above. Yes, it will be time-consuming and extra work. However, it will be worth it in the end! Work to do everything you can to move forward with your contract.
If you are still unsure of how to proceed with the news of a low appraisal, do not hesitate to contact us. Our team is willing, educated, and ready to assist you through this process. We have the tools needed to consider every option and assist you in moving forward with this exciting journey. We can answer any questions you may have. This process is important to you, so it is important to us. Our goal is to help you understand how to move forward and to equip you with the right knowledge and tools that will help you make the right decisions!