By the time a home is in the appraisal phase of the purchase, the buyers and sellers are pretty deeply invested in the transaction and have forked over some money to inspectors, surveyors, and other people or businesses. So it can be really inconvenient when a real estate appraisal comes in low. When an appraisal comes in low, either the buyer must come up with an increased down payment amount, the parties must agree to a price reduction, or some combination of both of these must happen, or the deal is dead. The buyers doesn’t get the home they want and the seller doesn’t sell the home they intended to get rid of. Now what?
There is little that can be done when an appraisal comes in low, but here are a few things to keep in mind that might help you.
1. First, read the appraisal and make sure the appraiser got everything right – the square footage, the number of bedrooms, etc. Appraisers use comparable properties and you can appeal if you feel they used poor comparable homes. If you find errors or feel that there are much more comparable recent sales that justify a higher price for the property, work with your agent to send the correct information and the applicable comparables you would propose to your mortgage professional, who can relay that information to the appraiser or Appraisal Management Company and request that the appraiser revise their report and estimate of value. The appraiser has no obligation to make the change, but the more glaring the error, the more likely it is that they will. Of course, some appraisers don’t want to admit being wrong and won’t make any changes. After all, an appraisal is an estimation of value.
2. You can escalate your concerns to the lender and request a new appraisal. Sometimes a second appraisal will come back higher, but again, the lender is not required to use the higher of the two, but they might.
3. As the buyer, you can change lenders. Mortgage banks have more control when it comes to choosing appraisers than mortgage brokers do. After all, it’s the lender who is requiring the appraisal to secure the mortgage.
There is not a lot that can be done when an appraisal comes in low, but these are some basic tips that will help you. On Houston Real Estate Radio, I did a one hour interview with Mike Brewbaker, who is a veteran appraiser in the Houston area. His insight can be heard on a past show in the archives at HoustonRealEstateRadio.com.
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