How To Handle Surprise Appraisals
Congratulations! You made an offer on your dream home and it was accepted. In a perfect world, the house appraises at the offering price or higher than you offered, and you’ll move into your new space knowing you got a heck of a deal.
Unfortunately, there are times when the appraisal come in below the agreed upon sales price. It’s best to know what happens when an appraisal comes in short.
First, take a breath and don’t panic! Your loan officer can submit a reconsideration of value. There are times appraisers might not be right, as appraisals are opinions of value, not an exact science. If an appraiser missed market data (sales that would support the value) or incorrectly documented the home’s features (square footage, acreage, etc.), we provide documentation to support where we believe there was an error or omission.
It’s important to consider one thing while submitting a reconsideration of value: you cannot go into this with an emotional argument. Sure, the house is beautiful and has great curb appeal, but this is an emotional argument. You must have the facts and evidence to back up your claims, as that’s what an appraisal is all about. Appraisals take historical market data into consideration. The house you made an offer on might be the nicest house in the neighborhood, but what about the surrounding homes? The appraisal value can be affected by foreclosures and short sales in the area.
Aside from submitting a reconsideration of value, there are a few additional scenarios that can happen when your appraisal comes in lower than expected. Let’s say you offered $10,000 more than the appraisal price. Here are four things that can potentially happen:
- The best-case scenario you will face is the seller agreeing to drop the home’s price to the appraisal price. You just saved yourself $10,000!
- The seller decides the house is worth your asking price. You can still go through with the purchase transaction, but it’ll come at a price. You’ll most likely have to bring in the difference in the form of an additional down payment, depending on the terms of your financing.
- You will split the difference with the seller. Although the house appraised lower than expected, you now have the chance to pay an extra $5,000, rather than $10,000. Securing your dream home is worth the split difference.
- You and the seller cannot reach an agreement, so the contract becomes null and void. This is the worst-case scenario, but the best thing you can do is realize it wasn’t meant to be and restart the search for your dream home.
As you move into the appraisal process, it’s important to stay grounded and logical. Whether you end up experiencing the best-case scenario or the worst, bring the facts and hard evidence to the table to increase your chances of securing your dream home.
Have a question about low appraisals? Leave a comment below and we’ll provide you with an answer.