Published September 25, 2020

Q: What Happens if My Property’s Appraisal Comes in Low?

Written by Roger Nix

Q: What Happens if My Property’s Appraisal Comes in Low? header image.

Here are our tips for handling a low appraisal situation.

As you may already know, an appraisal is ordered through the buyer’s lender for the purpose of gauging their risk in making the loan. The appraiser will go out and determine the value based on recent, comparable sales in the area. In an ideal situation, the appraisal comes in right at the purchase price. However, that doesn't always happen. Sometimes the price comes in a little low, but you do have options:

If an appraisal comes in lower than the contract price of a home, there are four possible ways to remedy the situation:

1. The buyer can increase their down payment. For that to happen, the buyer has to have cash available to cover the required amount and be willing to apply those funds to the shortfall.

2. The seller can reduce the price to the appraised value. It’s not what the seller really wants to do, but this is usually the most viable option to keep the transaction alive, especially if the buyer does not have the cash to cover the difference between the contract price and the appraiser's value.

3. Renegotiate the contract price. This affords the buyer and seller an opportunity to meet in the middle (again, this assumes the buyer has the funds available).

4. Seller can provide a loan directly to the buyer. This is pretty rare, but it may be an option in certain circumstances.

Finally, you should know that an appraisal can be challenged. The success rate is low, but it may be worth a try. Be prepared that this process will likely delay the closing a bit.

Here’s the good news: Low appraisals only occur about 8% of the time according to a Fannie Mae study, so most likely it’s not a problem you will run into.

If you have any questions about appraisals, your home's value in today's market, or anything else related to real estate, do not hesitate to reach out via phone or email. We look forward to hearing from you soon.