The markets hot, inventories low, you list it, sell it and BAM, the appraisal comes in low.  Now what?  While low appraisals are not super common, this post on how to fix a low home appraisal will give you some avenues to pursue if you find yourself in this predicament.

Check The Comps

Make sure your agent reviews the comparable homes and checks for errors.  Appraisers are human and can make mistakes or overlook something like everyone else.  Take a look and make sure they have the correct amount of beds, baths etc.  If you see any errors have your agent reach out to the lender and submit a dispute with your reasons.  I’d highly recommend your email, or request be short, yet detailed, and written nicely.  Appraisers are not big fans of being questioned so coming in hot won’t help.

Change The Buyers Loan Terms

To make sense of this let’s make an example.  Let’s say you are the seller, the home sold for $200,000 with $2,500 back in buyer closing costs and the appraisal came in low at $195,000.  You could have your agent reach out to the buyers agent and suggest you take the $2,500 in buyers closing costs off the purchase agreement.  This option would then leave you $2,500 short vs $5,000.  Perhaps then as the seller you reduce the other $2,500 in sales price, now the offer and appraisal work.  Another option would be to see if the buyer is willing to adjust their loan terms to make up the difference somehow, if they are willing that is.  There are many options for this so have your agent check with the buyers agent.

Re-negotiate The Sales Price

Most offers will be subject to the appraisal.  If it comes in low now it’s now an offer that needs to be negotiated again.  Most of the time the buyer is going to say “hey, the house didn’t appraise so lower the price to meet the appraisal and we will move forward”.  If, as the seller, you’re willing to do that then simply draft an addendum to the purchase price.  Another option is try offering a split or some calculation that works for you and see how the buyer responds.  If you and the buyer cannot reach an agreement then the purchase agreement will be cancelled.

A few other things to keep in mind about a low home appraisal.  If the buyer was doing an FHA loan, that appraisal is now tied to the house for a period of time.  Meaning, if the deal falls apart and you try and resell it within a certain time period and the new buyer is also FHA that previous appraisal will be used.  No choice there, it’s the law with that specefic loan type.

The majority of time the seller either reduces the price to match the appraisal or works out a split that’s amicable between both parties.  There are some other options we can help you explore if you find yourself in this spot.  With nearly 20 years selling homes we have seen it all and found many ways to make things work so feel free to contact us below with any questions.