What Happens If the Home You’re Buying Doesn’t Appraise?

Central PA Real Estate Podcast with Dave Hooke

As a buyer, what happens if the appraisal on the home you’re about to purchase comes in too low? There are four main options you can explore: Cancel the transaction. This may be the best option for you, even though it’s a heartbreaker. If your appraisal comes in below purchase price, analyze your sales contract, consult with your attorney or Realtor, and determine if you have a financing or appraisal contingency. If you do, then you have the right to walk away from the transaction or renegotiate the transaction down to the appraised value. Come up with more cash. Only do this if you really want the property. If you’re concerned about resale or think that the appraisal is valid, you would essentially be overpaying for the home. However, a lot of customers look at the appraisal and think, “I really want this to be my home for many years.” In that instance, you might not care about the appraisal. Get creative with your lender. Talk to your lender and see if you have other collateral, like another property, that you can borrow against. You might be able to do a first and second loan on the property that will finance the difference in cash. With interest rates as low as they are, this can be an attractive option. Challenge the appraisal. Be careful if you decide to go this route; appraisers can get defensive and this is their expertise. First, consult with your attorney or real estate agent to determine if there are any errors in the appraisal. Then, call the appraiser. Be empathetic, not confrontational. Maybe the appraiser missed a comparable property, or maybe there was an error in the lot size. If you take a competitive approach, the appraiser’s defenses will go up and you won’t get anywhere. Take a more collaborative approach instead. Remember, if that appraisal comes in lower than the price you offered, you do have a few options. If you have any questions, please don’t hesitate to give me a call or send me an email. I would be happy to help you!