So, appraisal day has come and gone, and the news just rolled in. The home you are buying/selling appraised lower than the purchase price offered. What now?? Let's talk about your options.
1. Meet each other in the middle. Seller lowers the price and the buyer brings more money to closing. This option hinges on the cooperation and flexibility of both parties.
2. Seller lowers their price to the appraised value if the buyer cannot meet in the middle.
3. Buyer makes up the difference. Sometimes buyers will have the extra money to add to their downpayment, and they might be willing to do this if they see the value in the home.
4. Seller can order their own appraisal. There's no guarantee that this appraisal will come in higher, nor that the buyer's lender will accept this new appraisal. But, if the seller feels the appraisal is completely unrealistic, they can pay for their own and challenge the original one. Keep in mind, the lender is not likely to negotiate with the sellers.
5. Buyer can cancel the transaction, and seller can put the house back on the market. If an agreement cannot be reached between the parties, an option is to cancel the transaction and put the home back active on the market. As long as there was an appraisal contingency in place, and the cancellation is within the contingency period, the buyer's deposit is refundable without question. The downside to this is that the seller (and the buyer) will be starting over again from square one, but if there were multiple offers, maybe another buyer will be able to close the deal.
There are a few ways that you, as a seller, can prevent a low appraisal. The first is to keep a detailed history of all the upgrades you have done to your home. Present all invoices and before/after photos to the appraiser. Unfortunately, you will not get dollar for dollar the money you have invested, but knowing how much money you have spent will help the appraiser formulate a more accurate valuation of your home. Second, a proper listing price, set with the assistance of your realtor, from the beginning is key. Sellers should consult with their realtor during the listing appointment to review comparable properties to ensure proper pricing from the get go. Third, the comps you used to price your property, can be supplied to the appraiser, on the day of appraisal, by your realtor. This may help to ensure that the comps being used by the appraiser are accurate. A lot of stress and headache can be prevented by taking these steps and starting off on the right foot.
If you are thinking of selling your home, please contact me today, and I can provide you with a FREE property valuation. This valuable tool reviews your property, shows the condition of the local market, presents comparable properties for side-by-side comparison, recommends a pricing strategy, and shows estimated seller proceeds. It is a great first step when thinking of selling!