Help - What If It Doesn't Appraise?

As a buyer, what do you do if the appraisal on the house you are purchasing comes in lower than the value you are paying? To obtain buyer financing, part of the transaction process is for your lender to order an appraisal on the property.

So, what is an appraisal? An appraisal is an unbiased estimate or opinion of the fair market value of a property, usually performed by a licensed appraiser. The appraisal is done through inspection of the property and by looking at recently sold comparable properties in the area based on condition, location, upgrades, etc. There are times, however, when an appraisal comes in lower than the accepted offer price.

As a buyer, this can be frustrating and disappointing as it could mean you won’t be approved for your full loan amount. But don’t despair as there are options available to you as a buyer like challenging the appraisal. If you and your agent believe the appraiser missed some important details, you can challenge the appraiser and ask for a reconsideration.

Sometimes there are errors in an appraisal, and if you can show evidence to support your claim, then it may become possible to have the appraiser revise the report. Or you can order a second appraisal. Some lenders will allow for a reconsideration of value and allow for a second appraisal to be ordered; however, it can cost you another fee. You also risk the chance it still may not pay off.

Also, you can negotiate with the seller. The best scenario is to try and negotiate with the seller on the difference in sales price. This option is probably the easiest and can usually be completed with a good agent negotiating on your behalf.

Finally, you have the option to cancel the sale. If you have an appraisal contingency in place, you have the option to cancel the sale if the appraisal does not come in at value.

This option is usually the least favorite route to take and that is why it is always wise to have an experienced agent with good negotiating skills that can help work out any appraisal discrepancies to your advantage.