How to Handle a Low Appraisal
Buying and selling a home can be an emotional rollercoaster. When you get the call that the appraisal is lower than the offer it can definitely feel like your ride just took a wrong turn off the tracks. Before you get stressed and panic, close your eyes and take a deep breath. This does not mean that the sale is dead. Everyone might just need to work a little harder to make it happen. Below are Homes Re-Imagined tips for dealing with a low appraisal.
Understand Why Low Appraisals Happen
There are actually a few reasons why low appraisals happen more commonly than you would probably expect. First, the home could have an inflated price, thanks to multiple offers. If you were in a bidding war against other buyers this could be the reason.
READ What You Can Buy With $150,000 in Today’s Northern Virginia Real Estate Market
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Declining market values can be to blame, as can fallout from numerous short sales or foreclosures in the area. Sometimes, it has nothing to do with the home or market and everything to do with the appraiser being inexperienced.
Use it to Your Advantage
If a seller really needs to move the home, they may be a lot more flexible than you think. Use the low appraisal to renegotiate a better deal. It could be a blessing in disguise for you. Unless you are in a very hot market or the seller is in absolutely no hurry to close there is a good chance they will drop the price.
Think Twice About Overpaying
You may be thinking you will borrow the cash difference from your retirement fund or your parents, but you may end up full of regret. As much as you love the house it is still a business transaction. Would you offer to pay way over the retail price for anything else? Paying more for a house than what it is worth is typically advised against.
Prepare the Second Appraiser
If you are going to request a second appraisal it is important that they understand why you bid the amount you did. It is a good idea for your agent to be at the property waiting for the appraiser to provide them with a list of comparable sales and listings.
Seller Provides Second Mortgage
The seller may be willing to carry a second mortgage to cover the difference. You and the seller would need to come to terms on the details. They may require payments or perhaps they will make the balance due next time you file taxes.
Low appraisals can happen for many reasons. Fortunately, the contingency clause in your contract gives you the opportunity to renegotiate. Don’t panic, assess the big picture, and then execute your new game plan.