If your appraisal comes in below the amount of the Contract, what happens? A little bit of cursing and gnashing of teeth, followed by the following:
Check for Errors
Our team reviews the Appraisal carefully to see if there are any errors that would cause the low value (a missed bedroom or not counting the finished basement, etc). If there is an error, we submit a request through your Lender for it to be redone or corrected and we cross our fingers that it raises the value. If it is a significant issue, it will likely be resolved but keep in mind that statistically, only 10% of ‘rebuttals’ sent back to Appraisers are ever changed (avg in 2013).
Adjust the Purchase/Contract Price
Unfortunately, the most common fix is for the Purchase Price to be adjusted down to the Appraised value. This means less money for the Seller and is the reason we work hard to avoid this situation.
Buyer Brings Cash
In very rare circumstances where a property is a hot commodity and a Buyer ‘outbids’ other offers, we will require that should the Appraisal come in low the Buyer will have to bring cash to cover the difference. Most of the time a Buyer will not be willing to pay above ‘appraised’ value for obvious reasons.
Unfortunately, in some situations a Seller cannot afford to drop the Contract Price and a Buyer is not willing to pay over the Appraised value, so the Contract fails. In some cases this can cause a headache in putting a home back on the market, as it can be stigmatized by a failed contract. It is definitely a ‘worst case’ scenario and one we work hard to avoid.
- Learn More – Is an Appraisal the Same for Refinancing and New Purchases?
- Previous Topic – Logistics of an Appraisal