It’s a nightmare situation: You’ve spent months searching for your dream house, finally get an offer accepted, and then … the house doesn’t appraise for the agreed-upon price.

Now what?

Take a deep breath

It can be very stressful for both buyers and sellers if a deal falls apart because of the appraisal. But you’re not alone. Low appraisals happen more often than you might think, especially in rising markets.

Sometimes there are insufficient comparable sales applicable to the home you want, or maybe distressed sales in the area have skewed the appraisal.

Lenders will only lend funds up to a certain percentage of the appraised value or the purchase price, whichever one happens to be lower.

If the appraisal is lower than your offer, you may need to come up with more cash — but you do have other options.

Look over the appraisal contingency clause

Sometimes all parties need to join together to make the deal work: sellers, buyers, and agents. Sellers might come down on price, you might pay closing costs, and agents might even take less of a commission — but the deal still goes through.

Get a second opinion

Maybe the appraiser’s estimate of the home’s value was inaccurate. These happens very rarely, but – in those case – it could make sense to do a value appeal.

The appraiser and their management company will review the appeal and respond by reevaluating the property or explaining why he or she did not use the comparable sales the lender sent.

Try not to pay more than appraised value

You might think you have found the only house you’ll ever love, but with that mindset, you’re liable to get hurt. Try to remove your emotions from the equation. The euphoria of offering and counter-offering on a home can quickly become buyer’s remorse.

If you do pay more than the appraisal, you’ll spend more than the house is worth. If you wouldn’t pay more than the list price for a car or even for shoes, you generally shouldn’t do so for a house, unless you are definitely planning to live in it for a long time, allowing for the rest of the neighborhood to catch up with your house, which may be the most updated home on the block.

Forget about whether you’re in a hot market

Unless cash buyers are ready to swoop in, which does happen if the home is very appealing, you can use the low appraisal as an opportunity to renegotiate.

As long as you’re not in a hot market, the seller will often drop down and sell for the appraisal amount. Once people are entrenched in a deal, they usually try to work things out.

Posted by: Carlson Mortgage – a top-rated St. Louis mortgage broker providing home loans in the state of Missouri. We are routinely ranked as a #1 mortgage broker in Missouri on Yelp, Google and Zillow. We can be reached at (314) 329-7314 seven days a week.

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