What If the Appraisal Comes in Below the List Price?

Buyers: You have options if the appraisal comes in below the list price.

So your appraised value came in below the purchase price. What do you do now? Today we’re discussing this issue that’s happening more and more in today’s real estate market.

If you’re a buyer obtaining financing, your lender or bank is most likely going to require that an appraisal be done at the property. They’ll send out a licensed appraiser to determine what the fair market value of the home is. This is because the bank or lender will only lend you the fair market value. However, when the appraised value comes in under the purchase price, that doesn’t mean the deal is dead. 

In the last 35 to 45 days, we’ve had three houses appraise way under the purchase price. One came in $85,000 under the list price! We were able to resolve all three of these deals. If this happens to you, there are a few options you should know about:

1. The buyer can pay the difference. If the seller doesn’t want to come down much (or at all) on the purchase price, the buyer can offer more money to make up the difference between the appraised value and list price. This will be the best option for the seller.

“When the appraised value comes in under the purchase price, that doesn’t mean the deal is dead.”

2. Find middle ground. For example, if the difference between the purchase price and appraised value is $30,000, the seller can come down $15,000, and the buyer can pay $15,000, so you’re meeting in the middle. It’s in the best interest of the seller to find a solution that works for both parties because if you walk away from the deal, they’ll probably have the same problem with the next buyer. This can also make the process easier and the seller can close quicker.

3. Cancel the contract. If no resolution can be reached, you as the buyer have the right to cancel the contract and get your deposit back. This is why it’s necessary as a buyer to keep the appraisal contingency in the contract. 

Another question we get from both buyers and sellers is, “If there’s a difference between the appraised value and purchase price, can we fight it?” While yes, you can fight it, very rarely is the appraisal or management company willing to change the appraisal report, even if you have comparables. It also takes about two to four weeks to refute an appraisal report, so if time is of the essence, it may not make sense to do so. 

If you have questions about this or any other real estate matter, give me a call or send an email today. I would love to help you.