What happens if the appraisal comes back lower than the asking price? With the market the way it is right now, this is a question we’re hearing all the time. We’re seeing appraisals coming in low more often than ever because homes are appreciating so quickly. We’ve had times where we spoke to people considering selling, they decided to think things over, then two months later they’re selling for $10,000 or $20,000 more than our original comparables said they would.
Due to all this appreciation, appraisers are having a difficult time keeping up. They’ll always be looking at what sold a few months ago—not what’s selling now. So what do we do when the appraisal comes back low?
1. Check the appraisal for accuracy. Appraisers are human, so sometimes they make a small error or typo. We’ll ensure all their information was accurate and the appraisal looks correct.
“We’re seeing appraisals coming in low more often than ever.”
2. Create a rebuttal. If everything is accurate on the appraisal, your listing agent will compose a report that will essentially say we don’t agree with the appraised price and, here’s why. Then it’ll list comparable homes that support the purchase price and also a list of reasons why we feel the price we set was valid. This is then sent to the appraiser, and we typically have about a 50% success rate of getting the appraisal changed. If that doesn’t work out, then move on to option three…
3. Work it out with the buyer. The seller could bring their purchase price down to the appraised value, the buyer could pay the difference between the two prices in cash, or the buyer and seller could meet in the middle.
If none of these things work, unfortunately, the deal falls apart because the buyer and seller can’t agree. No one wants that because the buyer loves the house and the seller wants to make the sale work, so usually everyone works together to renegotiate.
Due to the sheer number of low appraisals we’re currently seeing, more and more buyers are willing to pay cash to secure the property. It’s a seller’s market, things are hot, and buyers are battling for homes. Also, remember that all-cash buyers may not even be getting an appraisal, so they can skip all this uncertainty. This also means buyers with loans want to compete more heavily against those cash buyers. These are crazy times in the real estate industry.
If you have further questions about low appraisals or real estate in general, please feel free to reach out on our website, Facebook, Instagram, or give us a call. We would love to be your real estate resource.
