Low Appraisal? Now What?
By Michelle Goetzinger May 17, 2019

So your house (the one you’re buying or selling) got a low appraisal: It isn’t worth as much as you’d initially thought, which will lower the price you can ask for it or reduce your chances of selling at the current price.

First of all, try to view the situation objectively. Here is a brief overview of how appraisals work:

  1. Buyers usually need to take out loans to finance the purchase of a new house.
  2. Lenders (usually banks) need to determine that the home you are requesting the loan against is valuable enough of an asset to cover the loan amount.
  3. The Lender requests an appraisal to determine its worth.
  4. The appraisal value must match or be greater than the loan amount.

PRO TIP: Even if you don’t need it (maybe you can purchase in cash) make sure your realtor adds a mortgage contingency to your offer! This will protect your cash investment should you get a low appraisal.

– Michelle Goetzinger (bio)

Purchase contracts sometimes contain a mortgage contingency which requires the buyer to prove they can obtain financing for the full cost of the house. The maximum financing the buyer can get from the bank is for the amount the house is appraised at. Usually he or she will pay a down payment that is a percentage of the home’s price, and agree to obtain financing for the rest (known as loan to value).

Getting the loan requires the property to be valued at or above the purchase price.  A low appraisal is problematic because it means the buyer can’t get as much money for the loan as the purchase contract requires. He or she must then come up with the extra money on his or her own, ask the seller to sell for the appraisal value instead of the purchase price, or look for another property to buy. Either way, the seller is in a tough spot because they face the prospect of either taking a loss on the anticipated purchase price, or not being able to sell the house at all.

There are options for moving forward, however:

  1. Figure Out Why: Try to figure out the cause of your low appraisal. There are many variables that can lower your home’s appraised value. More homes on the market than there are buyers will decrease market value. On the other hand, more buyers than homes may lead to more offers, which may inflate the price beyond its true value. Check out the condition of houses in your neighborhood as well: A lot of foreclosures, sales to relatives, and run-down or bank-owned properties may bring down your home’s value.
  2. Get a Second Opinion: Appraisals are by their nature very subjective evaluations. Appraisers look at property dimensions, neighborhood characteristics, construction details (type of foundation, interior wall construction, etc.), and overall appearance of your house to compare it to sales in your area in the past year. It’s possible that your house appraised at a lower value due to appraiser error. Sometimes an appraiser who is new to the process will overlook important variables or fail to account for local variables that would affect the home’s value. This is rare due to rigorous appraisal standards but can still happen especially since comparable sales will affect the appraisal, but they must truly be comparable (from a similar neighborhood type, etc.).  Request a copy of the appraisal report (only available from the buyer) and scan it for any glaring inaccuracies. Ask the lender if they will consider a second appraisal. (However, only the lender can order a second appraisal, and only the buyer can request one.  It may help to offer to at least split the cost of a second appraisal.)
  3. Put the House Back on the Market: A new appraisal could be for a very different amount, especially if the first appraisal was not performed by the Federal Housing Administration (which assigns case numbers to track its appraisals). The flip side of a low appraisal is that the buyer probably cannot afford the difference between the loan amount and the home’s price based on the mortgage contingency clause in the contract terms. So you can potentially resolve the situation by getting a new buyer who can afford the price.
  4. Change the Price: Lower the house’s asking price. Depending on how much the buyer wants your house (and how much you want to sell it), this is often the best solution in terms of time and hassle for both parties. If the house’s appraisal is definitely low, there is no guarantee you will be able to find another buyer.
  5. Negotiate with the Buyer: The buyer may be willing to pay more in cash to make up the loan to value difference. If their lender doesn’t permit this option, they may pay some of the seller’s closing costs instead.        
  6. Get a Trusted Adviser: Avoid a low appraisal in the first place by only selling through a trusted realtor with good results selling houses. (Ask to see the average time on the market for their listings.) Additionally, make sure your home is in good shape before the appraisal. Fix any obvious damage and remove any unsightly features.

A low appraisal can be a frustrating roadblock to buying or selling a house. However, there are several ways to resolve this issue, or prevent it from happening in the first place. Conducting adequate market research, making sure to maintain an attractive property, and establishing a good relationship with your buyer or seller will all serve to decrease the odds of unpleasant surprises when the appraisal report comes back.

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Need Help Understanding Your Options?

Call Michelle @ 724-504-0070

I’ve been working in real estate since 2006, first as an investor and then as an agent. I know how to properly price houses in Pittsburgh. I know the sorts of people that are looking for property in your area, and I know where your most promising buyers will likely come from. I can sculpt the perfect marketing strategy for your home.

My philosophy is people first. I’m not trying to earn your business. I’m out to help people sell their houses or get into the best home for them. My experience has shown me that when you’re looking out for people’s best interests, the business comes.

Your perfect buyer is out there, right now, looking for your house. Let’s find them together.

Pittsburgh. Your City. Own It.


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