Before getting a mortgage loan, your lender will order an appraisal of the home to verify its value. A home appraisal is used to determine the fair market price of a property, and a lender will not lend more than the appraised value.
While low appraisals aren’t common, they can happen. In the event that your home’s appraisal comes in low, it’s best to be prepared and know what the next steps are.
Review The Appraisal
Ask to review a copy of the appraisal to help understand why the appraisal came in low. This could be due to a number of reasons including:
- The condition of the home
- Upgrades and/or repairs done
- The location of the home
Negotiate The Price Of The Home
If the appraisal comes in low, remember that it’s not to the seller’s advantage either. They may be willing to negotiate the price down to make the sale. Remember that during negotiations, your lender at Merchant of Homes is there to help you and advocate for you to the benefit of all parties.
Pay The Difference
If you can afford to do so, you can instead pay the difference out-of-pocket. This means you will be able to purchase the home with the lower loan amount while paying the rest in cash. For example, if the selling price is $200,000 and the home only appraises for $190,000 you will have to pay the $10,000 difference.
Walk Away
Not feeling the love? It’s ok to walk away. If you have an appraisal contingency on your contract you can safely walk away from the deal without losing your earnest money deposit. Always consult with your agent about your options before walking away—and within the contingency’s time limit.