This situation is a headache – You’ve spent months getting pre-qualified and finding the perfect home, only to find out the offer amount and appraisal value aren’t exact.
What do you do?
Keep Calm and “Move” On
It can cause sleepless nights for the buyer and seller if the deal falls apart because of the home’s estimated value. You’re not alone. A low appraisal happens often especially in rising markets. Where there’s a will, there’s a way.
It really comes down to “comparable sales” in a real estate market. In a hot seller’s market there’s all kinds of stuff going on between what a home’s suspected worth is and what it actually sells for.
Conventional lenders will ,generally, only lend funds up to a certain percentage of the appraised value vs. the contract price in a sale. If the appraisal is lower than your offer, you may need to come up with more money or simply renegotiate or look at these other options.
Two minds are better than one
Maybe the appraiser’s estimate of the home’s value was wrong. There’s a high demand for appraisers in Denver. So the work overload may be too much for some. The appraiser will review the appeal and respond by reevaluating the property or explaining why he or she did not use the comparable sales the Realtor provided.
Another option is to try working to get a second appraisal. Your lender might be willing to accept the subsequent, higher appraisal. Especially if you are well qualified, sellers are willing to pay for the second appraisal to keep the deal on the table.
To help guard against a lower appraisal, make sure you let the appraiser know the reason you made the offer you did.
Try not to pay more than appraised value
You might think you have found the only house you’ll “ever” love, but with that mindset, you’re liable to get caught in buyers remorse. Try to remove your emotions from the equation. Everyone loves a bargain.
If you do pay more than the appraisal, you’ll spend more than the house is worth. If you wouldn’t pay more than the list price for a car or even for shoes, you generally shouldn’t do so for a house.
Forget about whether you’re in a hot market
The low appraisal is an opportunity to renegotiate no matter what type of market you’re in. In a seller’s market it can be a little more difficult.
As long as you’re not way in over your head on how much your first offer was, the seller will typically drop down and sell for the appraisal amount. Once people are decided upon a deal, they usually try to work things out and stick with the commitment. That’s why they decided to sell with you in the first place.
Don’t let an appraisal stop you from getting the home of your dreams. Especially with low inventory in a city like Denver, Colorado!