LOCAL RECORDS OFFICE: Want to learn how to deal with a low home appraisal? In a competitive real estate market, a home being sold may enter into a multiple offer situation, which could potentially raise the purchase price above the comparable sales in the area says, ‘Local Records Office’. In a situation like this, it is possible that the home appraisal for the buyer’s mortgage lender will come in lower than the purchase price. In a real estate market that favors buyers (home prices are soft or declining), sellers can also face a home appraisal that is lower than what they paid for the home if they bought the house at the peak of the market. Be aware that a low home appraisal can happen in any type of real estate market, especially in Tallahassee Florida.
Why Do Low Appraisals Happen?
Here are a few reasons why a home appraisal may come in low:
- Inflated home price because of multiple offers.
- Declining real estate market due to a large inventory of homes and not enough buyers.
- The seller has overpriced the home.
- The real estate appraiser lacks experience and doesn’t understand the influences on value.
- The real estate appraiser incorrectly selected his comparable sales for his report, which may have resulted in a lower home value than what should have been assessed.
What Are the Solutions for Low Appraisals?
Local Records Office says, “If a low home appraisal is threatening to sink your sale, purchase or refinance, stay calm, here are a couple solutions”:
- The buyer can pay you the difference between the purchase price you agreed upon and the appraised price in cash, you can sell the property for the appraised value and get the difference from the agreed upon higher price in a lump sum cash payment if the buyer is able to do so.
- If you are the seller of the home you do have the option of lowering the selling price. If you don’t you will run the risk of every buyer running into the same problem and not being able to get a mortgage because of a low appraisal.
- The seller can offer to carry a second mortgage for the difference.
- If the buyer feels they absolutely have to have your home and you are not willing to lower the selling price and the buyer cannot come up with a lump sum to pay you (as mentioned in option 1) you could accept having them make payments to you over a period of time instead of the lump sum.
- Get a second opinion, have the buyer ask the mortgage lender for a list of their approved appraisers and select another company on this list and hope for a higher value, you could end up wasting another $300 on an appraisal but appraisers are not perfect and a mistake could have happened.
- Cancel the transaction
Have your realtor put in your purchase and sale agreement a loan contingency that if the home appraises for a lower value that you will get your money back (if you’re the buyer). If you are a seller being affected by a low appraisal propose on of the above options to your buyer if you would like to try and salvage the transaction. See more on this video here.