The process of purchasing a home can be tedious, as there are many legalities and service providers you’ll work with to accomplish buying a property. One of these vital steps is the appraisal process, in which mortgage lenders send over a professional appraiser to examine a property.
This is done to make sure its value is equivalent to the loan amount being requested. If you get a low appraisal offer, it’s valuable to know your options to proceed forward in the most orderly way possible.
Sometimes the appraised value of a home will come back lower than the requested loan amount due to a number of factors. If the home fails to meet certain guidelines, your lender may decide to offer you less funding than originally requested or may not agree to the loan at all.
However, there are options in favor of the buyer in the case a home appraisal comes in lower than expected.
In the case of a low appraisal, it’s essential to do research to get a better understanding of why the report came back lower than the purchase price. Research the local real estate market because in some cases, if the home has been on the market for a while, the listing price may be outdated.
If the low appraisal was justified, you can negotiate with the seller to help pay for needed repairs or ask if they can meet you in the middle with their listing price.
If there is an appraisal contingency in the purchase agreement, a buyer can back out of a home purchase if the appraisal comes back too low. This is why it’s vital to examine and pay close attention to detail with the help of your real estate agent to all items in the purchase contract.
A low home appraisal isn’t the end of your home buying process, it’s simply an obstacle that can be overcome with research and planning.