The home-buying process is a high-stakes thrill ride full of exhilarating ups and scary downs, but unquestionably one of the most deflating moments is when the appraisal comes in significantly lower than the accepted offer. This is, to use technical real estate lingo, “a bummer.”
Either you feel as though you got the raw end of a deal by paying more than the property’s worth or, if you don’t have extra cash to hand over, the deal can crumble into dust. In a rising market, low valuations are pretty common because appraisals are based upon sales that closed when prices were lower,
So, what do you do if this happens to you? You have four options:
1. Appeal the appraisal
Sometimes called a “rebuttal of value,” the appraisal appeal takes some work. In fact, it’s a total team effort. “The homeowner, loan officer, and often the real estate agent work together to find better comparable market data to justify a higher valuation,” Either you feel as though you got the raw end of a deal by paying more than the property’s worth or, if you don’t have extra cash to hand over, the deal can crumble into dust. In a rising market, low valuations are pretty common because appraisals are based upon sales that closed when prices were lower.
2. Order a second appraisal
Most often, if the appraised value is not as high as the agreed (contract) price, the seller’s agent will ask to see the comps and get a second or third appraisal.
But it will likely cost you–you’re not only paying for the first appraisal (in your closing costs), but you’ll pony up for any additional appraisals as well. They can range between a few hundred dollars and $1,000 depending on the area. Occasionally, real estate agents or sellers will foot the bill if they really want to keep the sale.
3. Negotiate with the seller
If you’re lucky, you and the seller will both budge a little.
4. Walk away
No one wants to let a property slip through their fingers, especially if it feels like their dream home. But beware of ignoring a low appraisal—you could end up losing thousands whenever you decide to sell.
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