Getting ready to sell your home? Or looking to buy a home?
Whenever you are getting ready to go through a home sale or purchase, the appraisal is typically the last thing on your mind. Everyone is excited to look at new homes or start preparations to sell.
But it’s important to keep the home appraisal in the forefront of your mind because it has a lot of power over the sales price, final negotiations, and your mortgage payments.
So what happens if your property appraisal doesn’t match the sales price you have set or that you have already put in an offer for?
What can you do to save your home sale or purchase?
Your Appraisal and Home Sale Preparations
There is a lot that goes into a property sale/purchase. And everything needs to line up just right if the sale is going to go through. It takes a lot of work from both the seller and the buyer to negotiate and agree on everything.
You need to agree to a price first. Which is honestly usually the hardest part. The buyer always wants to pay as little as possible and the seller always wants to get as much as possible. But that is pretty obvious and understandable.
After going back and forth and finally agreeing to a price, negotiations still aren’t done. You need to agree to specific dates, closing costs, any repairs or updates that the buyer might want to include, or even repairs from issues found during the inspection.
Once all of the final negotiations are settled and have been agreed upon by both the buyer and the seller then you need to go through closing.
After all of this back and forth that still doesn’t mean that the sale will go through. Even if you do everything right, there are some things that are just out of your control.
If you have gone through every step of the home buying/selling process and the appraisal comes back either higher or lower than expected, it can derail everything.
So how do you begin to try and take control back?
What Happens if the Appraised Value Is Lower?
It can be a bummer for your appraisal to come back lower than you were expecting. And in some cases, this can completely ruin your home sale. The buyer might not be able to afford to pay the price originally agreed upon during negotiations.
And that’s not their fault. If the appraisal comes in lower, their mortgage lender will likely only approve a loan within the scope of the appraisal value.
If that happens you just might find yourself up a creek without a paddle. If the buyer can’t afford to pay the sales price and the seller refuses to drop in price the sale will fall apart.
However, there are several ways that you can try to save your home purchase/sale if the appraisal comes back lower than anticipated.
What Are Your Options?
Well, there are several ways that you can go about this.
- You can renegotiate a new price for the sale that reflects the appraised value. However, as the seller in this situation, there is honestly little that you can do. If the price is appraised lower than you were asking for then the buyer has all the real negotiating power.
It can be nearly impossible to have a new appraisal done reflecting a new amount and actually have it be accepted by a mortgage lender.
- Now, if the seller is refusing to lower the price, as the buyer you can pay a higher down payment to cover the gap left by your mortgage lender. However, for most buyers, this won’t be an option. A down payment is difficult to pay, especially if it increases dramatically.
- The last thing that you can do is try to dispute the appraisal. However, this is a very difficult process. Appraisers know the market and the value of homes in their appraisal area very well.
And the appraisal process is very calculated. Yet, there is an aspect of opinion that can change an appraisal value from one appraiser to another. And even if you have another appraisal done, the likelihood of that appraisal making a difference in your mortgage lender’s eyes is not great.
It would take a lot of evidence to prove that the first appraiser was mistaken in their original appraisal.
What Happens if the Appraised Value Is Higher?
There are also several ways that you can try to save your home purchase/sale if the appraisal comes back higher than anticipated. Which is honestly starting to be an issue in 2022.
The housing market and home prices were much higher than normal last year in 2021. Now, we are seeing the market beginning to cool down a bit but because of the inflated values from last year, appraisals are still coming in a bit higher.
But that is to be expected during the cooling down period.
The real question is what do you do when the appraisal amount doesn’t match the sales price? What if the appraisal amount is higher than the sales price?
Well, consider yourself one lucky duck.
Say you are the buyer in this situation. You and the seller have agreed to the home purchase price of $350,000. You go through the closing process and are waiting for the appraisal to come back in order to finalize your mortgage loan.
Then you find out that the appraisal comes back and the home has been appraised at $370,000. This is the best possible situation for you to be in. You and the seller have already agreed to a price.
So just relax, and be happy that you are getting such a good deal.