If you are going through the home selling process you’re probably feeling excited and anxious. Waiting for an appraisal report to come back can be stressful. You’re hoping that the value you have listed your home for and the buyer agreed upon will be confirmed by your appraiser.
But what happens if the appraisal comes in low and your home sale is now in jeopardy? Well, there are a few different things that you need to understand.
What Happens If Your Home Appraisal Comes In Too Low?
Your home appraisal coming in lower than you expected is never a good thing for the seller. Of course, you want to get the most you possibly can for your home. However, now that the appraisal has come in low your options are limited.
First, you need to understand why a low appraisal is bad for your home sale. Let us explain this with an example. So let’s say your home is worth $350,000 (or at least that is what you have listed it for).
A few buyers put in offers and you eventually settled on a buyer who was willing to pay the full price at $350,000. Now you have had an appraiser come in and conduct the appraisal but to your surprise the appraised value of your home is lower at $325,000.
Your entire sale could fall through. The buyer’s mortgage lender will not loan them more than what the house has been appraised at. So that leaves you with a significant price drop at $25,000.
Why Did Your Appraisal Come In so Low?
There are many different reasons why your appraisal could come in so much lower than what you expected. The housing market is always fluctuating. And other homes sales in the area are what determine your homes value.
That is how an appraiser determines what the value of your home is. They will look at Comparables (aka Comps). This just means other similar homes in your direct area that have recently sold.
Your appraiser will look at these sales and use them to compare your home and what price your home should be. Many people would love to believe that the appraiser made a mistake when looking at the house and the comps.
However, it is extremely rare that any appraiser would make this sort of mistake because of the Home Valuation Code of Conduct (HVCC) that every certified appraiser uses to ensure they are taking everything they need into consideration.
More often than not the issue is that the seller overpriced the home. It is very common and can be a hard thing to come to terms with for most home sellers.
Get an Appraisal Before You List Your Home
Having your homes appraised value come in lower than expected is never ideal. However, this is why it is important to get an appraisal before listing your home. Not everyone thinks that this is an important step in the home selling process. But that isn’t true.
Being able to verify what your home is actually worth before lining up a buyer can help save you from all of the stress and anxiety of dealing with a low appraisal.
If you are already too far along and are currently dealing with a low appraisal you do have a few options you can choose from.
How Can You Save Your Sale?
There are a few different options that you can choose from when trying to save your home sale from a low appraisal.
File for a ROV (Reconsideration of Value)
You can file for something called a Reconsideration of Value (aka ROV). This is where you have an appraiser come in to revalue the property. However, this is very difficult to do. Proving that the appraiser made a mistake is very difficult.
If you want to file a ROV you need to have proof that there were other comps that were overlooked by the appraiser. You will need the help of your real estate agent to find other comps in the area that have sold or are getting ready to sell for higher value.
Getting this proof isn’t easy and you will need to make sure that it is undeniable that the home is worth more than what the appraiser said it was.
This rarely works because the more the home owner looks into the comps, more often than not they discover that the appraiser’s original valuation was accurate. However, it is possible.
Working With the Buyer
Your other option is working with the buyer. It is not easy but you can decide to accept a new offer from the buyer for the value the home was appraised for. That can be a tough pill to swallow but might have to be what you do if you still want to sell your home.
Other than that you can wait to see if the market in your area starts to go back up but it could also decrease. Really, this is something that you should discuss either with an appraiser or your real estate agent so that you can make an informed decision on how to move forward with your home sale.
If you want to learn more about appraisals, want to talk with someone about your appraisal, or want to know how we can help you with an appraisal give us a call today at (941) 743-3700.