Deal or No Deal? What Happens When a Home Doesn’t Appraise at the Offered Price?
Raise your hand if you’ve been personally victimized by a low appraisal🖐️😭. If you’re in the market to buy or know someone who is, you might have encountered this situation, and it’s never fun. But don’t worry—while it can be a challenging experience, it’s something that can be navigated with the right guidance and knowledge.
The Scenario: A Low Appraisal
Imagine you’ve found your dream home. You’ve made an offer, it’s been accepted, and you’re excitedly moving through the steps towards closing. Then, the appraisal comes in lower than your offer. What does this mean?
An appraisal is an independent assessment of a property’s value, conducted by a licensed appraiser. Mortgage lenders rely on appraisals to ensure that they’re not lending more money than a home is worth. If the appraisal is lower than your offer, the lender may not approve the full loan amount you need.
The Impact: Negotiations and Decisions
Here’s where things can get tricky. If the appraisal is lower than the offer, several things can happen:
1. Renegotiate the Price: Often, the buyer and seller will go back to the negotiating table. The buyer may ask the seller to lower the price to match the appraisal. Sometimes the seller agrees, sometimes they don’t.
2. Increase the Down Payment: The buyer might decide to pay the difference between the appraised value and the offer price out of pocket, which means increasing their down payment. This is the best cascenaria IF the buyer has the funds or resources to do so.
3. Challenge the Appraisal: In some cases, the buyer or seller can challenge the appraisal if they believe it was inaccurate. This involves providing evidence to support a higher valuation. This can be a timely and grueling process and if the discrepancy is more than say $10k, there may be no point to going through with the hassle.
4. Cancel the Contract: If no agreement can be reached, the buyer may choose to walk away from the deal. Many purchase agreements have an appraisal contingency that allows the buyer to back out if the appraisal is too low.
A Real-Life Example
Here’s a story that highlights how complicated these situations can become. A couple found themselves under contract for a home they loved, only to face a low appraisal. Negotiations were tough. They tried to renegotiate the price, but the seller became frustrated with the process, finding it too complicated and ultimately deciding not to sell.
While this was a setback, the story had a positive ending. The buyers were resilient. They found a new home, back under contract quickly, and this time the process went smoothly. This showed that real estate deals can be complicated and stressful. However, with the right team, the result will be positive, proving everything happens for a reason.
The Importance of a Good Realtor
If I’m being HONEST—real estate is complicated. It can get very convoluted at times. That’s why having a good Realtor is crucial. A knowledgeable Realtor can talk you through each step, prepare you for the “what ifs,” and help you navigate the complexities of the process. They can provide guidance on how to handle low appraisals, negotiate effectively, and keep your best interests at heart.
Stay Calm and Confident
Don’t be scared or feel intimidated. Feel confident that with the right team, you can push through any situation calmly and collectedly. Real estate transactions involve many moving parts and unexpected hurdles, but with expert advice and a proactive approach, you can overcome these challenges.
Remember, every setback is a setup for a comeback. If a deal falls through due to a low appraisal, it might just mean that your perfect home is still out there waiting for you.
Interested in learning more or need help navigating your real estate journey? Let’s grab a coffee and chat! ☕️🏡
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Feel free to reach out if you have any questions or need more information on navigating low appraisals and real estate transactions!
