After all the time you spent finding the ideal home, negotiating back and forth with the seller on the price and terms, both you and the seller may be stunned when the appraisal comes in below the purchase agreement’s price.
While low appraisals aren’t as common as they were as we rose from the ashes of a crashed-and-burned housing market, they do happen. Take a deep breath and dive into the following tips to salvage the purchase of your home.
1. Lower the Price
The quickest and easiest way to make sure that the sale goes through is to renegotiate the purchase agreement with a lower sales price to reflect the appraisal value. If there are incentives included in the sales price (appliances, furniture, etc.) perhaps you can take the sting out of a lower sales price by removing these from inclusion in the sale. This way, both you and the seller compromise.
2. Increase the Down Payment
If you truly love the home, and the seller refuses to lower the price, consider paying the difference between the purchase price and what the bank will lend. Increasing the down payment will bring the
sales price in line with the appraised value.
There is a danger in this though. Paying more up front will create negative equity in the home (the amount of the loan plus the larger down payment is greater than the appraised value of the property) and the loan may not be approved.
3. Challenge the Appraisal
Sellers may be able to help the cause, particularly if they have inside information on a recent sale in their neighborhood, such as a death or divorce, something that would explain lower-than-normal sales
price. Also, if there are pending sales in the area, and the seller or either agent happens to be privy to what the final sales price is, that could go a long way in helping the appraiser to reconsider.
Remember, the appraiser most likely doesn’t live in the neighborhood; he or she may not know the area very well and will most likely welcome your “insider” input.
A low appraisal doesn’t have to be a deal killer. Before you decide to walk away, be sure you’ve
done all you can to remedy the problem and get the sale back on track..