David Higgins' Blog
A low appraisal is a possibility when you’re buying a home. This can happen for a variety of reasons. If it happens to you, don’t panic!
Once you get an offer accepted on a house you love, it may feel like a huge weight has been lifted off of your shoulders. As any seasoned homebuyer will tell you, this is only the beginning!
It can be tough for both the buyer and the seller when a deal seemingly falls apart due to an appraisal that comes in too low. This is a common occurrence and there are ways to work around it.
Reasons For A Low Appraisal
There are a few reasons for a low appraisal including:
Insufficient sales data for the area can often skew appraisal numbers
Lenders may only lend up to a certain percentage of the appraised value
If the appraisal comes in lower than what you offered for the purchase price of the home, you’ll need to come up with the rest of the cash upfront in order to purchase the property. There are other options for you if you do come into this situation.
The Appraisal Contingency
The appraisal contingency is built into your sales contract and is a protection for the buyer, allowing them to walk away without financial burden if the appraisal comes in too low. This allows you room for negotiation on the seller’s part if they really are motivated. The contingency clause isn’t a one-size-fits-all protection. Even with this clause, you could end up spending more out of pocket cash or walking away from the deal completely. It’s simply a protection.
What If The Appraisal Is Wrong?
The appraisal can be submitted for review. The appraiser would need to explain why they didn’t use comparable sales provided by the lender. The property can also be completely reevaluated. In addition, you can request a separate appraisal from your lender. The seller may even pay for the second appraisal in order to keep the deal from falling through.
Don’t Offer More Than You Think The Property Is Worth
When you base huge financial decisions on emotions, you could end up in a bad situation. Your offer that wins the house can quickly become a case of regret as a buyer. Many times in a tight real estate market, you’ll need to make decisions fast. If you have a general idea of property values and work with a realtor to make an informed offer, you’ll be in better shape to avoid a big headache. While you may be able to afford paying more than a house is worth, it’s not a smart financial decision.
Low Appraisals Are An Opportunity
A low appraisal should be thought of by the buyer as an opportunity to renegotiate the sale price of the home. This step in the home buying process is a protection for you as a buyer for one of the biggest purchases that you’ll ever make.
15 Park Ave, Hull, MA 02045
- Excellent communication skills: This can run the gamut from being an attentive listener to having the ability to describe complex things to you in a way you can understand. This trait is especially important if you're a first-time home buyer or seller, and are relatively unfamiliar with the hurdles, requirements, and steps involved in qualifying for a mortgage, marketing a property, finding properties that meet your expectations (if you're in the market), and closing on a real estate sale.
- A positive attitude: While you don't necessarily want a real estate agent who is always looking at the world through rose-colored glasses (unrealistically), you do want to be working with someone who focuses on solutions, rather then problems. Let's face it: The search for your dream home or the ideal buyer for an existing home can sometimes be a bumpy ride. That's why it's important to pick an agent who is proactive, resourceful, optimistic, and results oriented.
- Responsive and accessible: A crucial thing to find out in your initial meeting with a real estate agent or Realtor is their preferred method of being contacted and how long they usually take to respond to phone messages and emails. The other side of the coin is the frequency with which they plan on contacting you with updates, progress reports, and reminders. Effective communication is always a two-way street, so if the conversation feels like they're talking at you, rather than to you, then you might want to point your search in another direction.
15 Park Ave, Hull, MA 02045