Everyone involved in a real estate transaction has the power to help or hurt the sale.  But today, we hear a lot about low appraisals causing big problems for buyers and sellers across the country.   

After months of house shopping, negotiating back and forth on sales prices and terms, many buyers and sellers are stunned when the appraisal comes in below the contract sales price.  Anger and fear are natural reactions, but the parties have to face the fact that an appraiser thinks value of the house is worth even less than they agreed upon.  So, what is the next step, if your home falls victim to a low appraisal?

Why Appraisers are Scared:  Appraisers aren’t villains, but they can be your worst enemy at times.  Because inflated appraisals are much to blame for the housing boom and crash, appraisers jobs are literally on the line every time they set a value of what a home is worth.   Due to the heat and scrutiny that appraisers face, they are much more critical about every property that crosses their desk.

You’re Not Alone:   When you learn that the buyer’s appraisal came in below the contract price, your first reaction will likely be anger.   The next emotion is may be panic or a feeling of helplessness.   Please try to take a deep breath and do not jump ahead.  Low appraisals are frequent problems these days and you are not alone in working this out.   

Change Your Perspective:  Although a low appraisal may indicate that the buyer overpaid for the property, that is not always the case.  Remember than an appraisal is only one person’s opinion of value, and the appraiser works for the lender.   Best advise is don’t freak out and don’t assume your deal is lost.

Be Clear and Get Real:  If you are concerned that the low appraisal will blow the deal, the parties need to get real about the data.   If the lower value is in line with prices of comparable sold property, then it is unlikely that it will change with a new buyer or appraiser.  The seller will have to chose whether to sell at the reduced price or stay in the home.  The bottom line is that you have control about what you will or will not sell your home for.

Negotiate with the Appraiser:   Although it is not always possible to negotiate an appraisal, you can usually appeal it.  Carefully, review the comp and sales data shown on the appraisal.  If you feel like there are errors, missed information or you find better comps, submit them to the appraiser.   They may or may not be willing to adjust the numbers, but they should consider all pertinent information, in order to do the job they are paid to do.

Negotiate With the Buyer:  While no buyer wants to pay more for a home than it is worth, most people realize that home values are subjective.  If the buyer loves the home and feels it is the best value for their needs, they may be willing to pay the higher price.  If a price reduction is necessary, then the seller can negotiate other terms such as repairs to make up some of the difference.   Since the buyer is getting a better deal than they thought, many are willing to accept the home in “as is” condition, for example.

Bottom Line:  The thing to remember is that a low appraisal does not necessarily mean a dead deal.  If buyer and seller are motivated, most issues can be resolved.   The bottom line is that no one can force you to buy or sell, if you don’t want to.  Although a low appraisal throws a glitch into the deal, always remember that You are in control.

Thank you for visiting Why 6 Percent.   If you have any questions about real estate, we are here to help.   If you want to sell by owner, but want to list on the MLS, we are here to help.   Call us at 1-800-381-9496 or email info@why6percent.com