Navigating a Low Home Appraisal: Tips for Buyers and Sellers

A low home appraisal can throw a wrench into a real estate deal, but it doesn’t have to end the transaction. An appraisal, an unbiased estimate of a property’s value by a professional, is critical for lenders determining mortgage amounts. When the appraisal comes in below the agreed-upon price, buyers may need to cover the shortfall, sellers may need to lower their price, or the deal could collapse. Here’s how both parties can handle a low appraisal effectively.

For Buyers

Review the Appraisal: Scrutinize the report for errors, such as overlooked home features or incorrect comparables, and consider disputing it if discrepancies exist.

Renegotiate the Price: Ask the seller to lower the price to match the appraisal or meet halfway to keep the deal alive.

Bring Extra Cash: If financially feasible, cover the difference between the appraised value and purchase price to secure the loan.

Request a Second Appraisal: If the first appraisal seems flawed, discuss a second one with your lender, though it may involve extra costs.

Explore Other Loans: Look into alternative loan options with more flexible appraisal policies to find better terms.

For Sellers

Stay Flexible: Remain open to negotiation to find a solution that works for both parties.

Check the Appraisal for Errors: Review the report for mistakes, like outdated comparables or unaccounted upgrades, and address them with your agent.

Lower the Price: Reducing the price to align with the appraisal can keep the sale on track, especially with a motivated buyer.

Offer Seller Financing: In some cases, providing financing can help the buyer overcome loan issues caused by the low appraisal.

Prepare to Move On: If no agreement is reached, be ready to walk away and relist the property.

Preventing Future Appraisal Issues

Buyers: Research comparable properties and get pre-approved for a loan to align your offer with market value.

Sellers: Highlight property upgrades during the appraisal and work with an experienced agent to set a realistic price.

Conclusion

A low appraisal is a common challenge, but with proactive steps—reviewing reports, negotiating, or exploring financing options—buyers and sellers can keep the deal on track. Stay informed and flexible to navigate this hurdle successfully.