Low home appraisal seller options. If you’re searching this phrase, chances are excellent you’re either selling a property, perhaps buying a home, or it’s a scenario you’re just researching. Whatever the reason, you need information and you need it right away. After all, a bank, credit union, or other mortgage lender will not only qualify a borrower by checking credit reports, verifying income, employment, assets, and debts. But also, qualify the collateral property. This is done through a home appraisal, a third-party professional who determines a home’s market value.
What a Low Home Appraisal Means
Okay, the home appraisal comes back and, it’s lower than the agreed selling price. So, what does this mean? Well, it obviously means there’s a really big problem. And, said problem will prevent the deal from going forward. It’s that simple. But, what does it actually mean? A low home appraisal means that the lender will not approve a mortgage for a higher amount. Which of course means, the buyer doesn’t have the necessary financing funds to purchase the property at the agreed selling price.
“Banks rely on appraisals to determine whether the size of a mortgage being sought by a homebuyer is justified by the market value of the home they’re looking to buy. Lenders do this to ensure that they will be able to recover their funds in the event they have to sell the home should the borrower default on the mortgage. When an appraisal comes in below the agreed upon price, a buyer may not be able to borrow the amount needed to buy the home. At that point, the buyer usually has to make up the difference with a larger down payment or walk away.” —USA Today.com
A home appraisal can make or break a home purchase deal because it will either endorse the agreed purchase price or challenge it outright. For instance, if a buyer and seller agree to a selling price of $410,900 but the appraisal comes in at $395,900, that means the bank will only loan the buyer the latter amount. Which means, there’s a difference of $15,000. In other words, the buyer must come up with $15,000. However, since that’s unlikely, the sale cannot proceed.
Low Home Appraisal Seller Options
For buyers, this can be a real setback, but they have the option to simply walk away with their earnest money deposit and look for another home. But, for sellers, a low home appraisal is devastating, because they learn the property just isn’t worth as much as they believe. Fortunately, there are some actionable low home appraisal seller options to try:
- Reduce the price. Okay, let’s start with the most disappointing option. After all, buyers who were willing to pay a higher amount for a home will delight at being able to purchase it for less money. Although, it does mean accepting less but at the same time saving the deal.
- Challenge the appraisal. You can challenge the appraisal amount though what’s know as an appraisal rebuttal. Now, this will cost you money out-of-pocket, but it just might be the way to get through the deal at the agreed sales price.
- Strike a deal in the middle. Another solution is to meet the buyer halfway and both parties contribute to making up the difference. You can ask your listing agent for some ideas on how to do this, either by paying closing costs or other means.
- Allow the buyer to walk away and relist the home. If you aren’t successful with challenging the appraisal, you could simply move-on and take the home off the market temporarily. Then, you can relist the property again.
If you’re going to sell your home in the near future and buy a new house, please don’t hesitate to phone me at 407-616-7286, I’ll be happy to speak with you.