Here are your options if an appraisal comes in low.
If you’ve been paying attention to the real estate market lately, you’ll know that just about every home is selling for more than its asking price. So what happens if the buyer’s appraisal comes in for less than the sales price? That’s been a real problem recently because home appraisers have to use sold properties, not active properties, for their comparables.
It is possible that human error is to blame. Your Realtor should get a copy of the appraisal report and verify that all the information is accurate. If it is an issue of human error, then there’s a process that your Realtor and lender can initiate to get the appraisal corrected. The more likely reason, however, is the fact that we’re in an ascending market, so appraised values just can’t keep up with sales prices.
If you find yourself in this situation, know that there are options. The buyer and the seller can renegotiate the contract to change the price based on the appraisal, or the buyer can cancel the contract altogether and get their earnest money back. Alternatively, the buyer could increase their down payment and cover the gap between the appraised value and the sales price.
In a hyper-seller’s market like this, the appraisal gap is the most common option. Experienced Realtors like ourselves can write that scenario into the contract from the very beginning and make sure that the buyer has sufficient funds to cover the low appraisal.
If you have any questions about home appraisals or real estate in general, please feel free to reach out to us. We’d love to help you.