When buying a home, the appraised value of the property can often determine whether or not the deal is successful. Unfortunately, there are times when the appraised value of the property does not appraise for the amount that has been offered by the buyer. When this happens and an appraisal comes in low, buyers may be left wondering what to do. If you find yourself in this situation, this blog post will help you understand how to deal with a low appraisal when buying a home.
Get a Second Opinion
When an appraisal comes in low when buying a home, one of the first steps to take is to get a second opinion. This will help you determine if the original appraisal was accurate or if any discrepancies could have caused the appraisal to come in lower than expected. You may want to consider getting an independent appraisal or a second opinion from another appraiser.
Getting a second opinion can be a good way to ensure that you’re not overpaying for the home. In some cases, the second opinion might reveal issues that the first appraisal missed, which could result in a better deal.
It’s important to remember, however, that it is ultimately up to the lender and not the appraiser to set the final loan amount and purchase price of the home. It’s also important to be aware that getting a second opinion can cause delays in the purchase process. Be sure to factor this into your timeline when considering whether or not to get a second opinion.
Negotiate with the Seller
When an appraisal comes in low, the seller now knows that the actual value of the property could be lower than their list price, making it risky to re-list the property and try to get more money. One likely scenario is for the seller to split the difference between the appraisal value and the purchase price.
This means that if the appraisal value comes in $20,000 less than the asking price, the Seller agrees to reduce the purchase price by $10,000 and the Buyer agrees to pay an extra $10,000 towards the property.
This works in favor of both parties because it enables the Buyer to avoid a lengthy and costly home search experience, while also allowing the seller to get closer to their desired selling price. Both parties need to negotiate in good faith to come to an agreement that they are both happy with.
Fork Out The Extra Cash
If you’re willing and able to spend the extra money to buy a home, then you can choose to fork out the extra cash and complete the purchase. It might be tempting to simply agree to the appraised value to avoid any further costs or delays, but if you’re determined to make the purchase, then you may need to put in some extra effort.
You may decide to pay the difference between the appraised value and the amount of your offer in cash, or you could take out a separate loan that covers the remaining balance. Whatever you decide, it’s important to make sure that you have the financial resources to cover the additional costs before proceeding.
It is also worth noting that some lenders may require that you have 20% equity in the home to qualify for a loan, so if you don’t have enough money saved up to cover the difference, then it’s important to work out a plan with your lender before going forward.
Finally, it’s important to remember that you will likely need to pay for an appraisal again if you decide to proceed with the purchase. This is necessary for the lender to determine the current value of the home and assess your ability to repay the loan. Be sure to factor this cost into your budget before making any decisions.
Walk Away from the Sale
Sometimes the best decision you can make when faced with a low appraisal is to walk away from the sale altogether. This could be an option if you’re not willing to negotiate or fork out extra cash for the difference in appraised value and sale price. Walking away may also be a good option if the seller isn’t willing to work with you at a more reasonable price.
Before deciding to walk away, it’s important to weigh all the pros and cons of doing so. You may be able to find another home that suits your needs better in the same area and with a more favorable appraisal. On the other hand, there may not be any other homes available in your desired location, and you might end up missing out on a great opportunity.
If you do decide to walk away from the sale, be sure to review your contract carefully to make sure there are no cancellation fees or penalties that you’ll be responsible for. You should also speak with your real estate agent and lender about the situation, as they may be able to offer additional advice or options for resolving the issue.
