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Didn’t Appraise?—Buyer & Seller, You Have A Problem

It’s all set. An accepted offer has been reached.

They buyer is applying for a conventional mortgage. The bank appraiser finally comes to call and completes the appraisal process.   Days pass, tension mounts. Will the property appraise for the agreed upon price or higher?

Did Not Appraise

If the appraisal number is below the agreed upon price, the deal may just head south. Not quite like having a baby, but the wait can be exhausting.

The appraisal number finally arrives. Since your agreed upon sales price is $210,000, the magic number has to meet or exceed that figure. You are floored discovering the property appraised at $195,000. How could that be? Happens all the time these days and a number of reasons are plausible.

The loan officer explains they will lend you 80 % of $195,000 not the 80 % of $210,000 you were counting on. What to do?

Four possible options you have moving forward:

1)            Seller agrees to take the $195,000 as a renegotiated term of purchase

2)            Buyer and Seller compromise and renegotiate price perhaps splitting the difference

3)            Buyer agrees to pay the original $210,000 agreed price and proceed to contract

4)            Seller remains at agreed upon $210,000 price and buyer exits the transaction

Foggy

The process is not as smooth or easy as many think. The road to closing is often bumpy with foggy areas in need of clarification and due diligence. The reasons for a property not appraising at the agreed upon price are many and will be the subject of another blog post. Suffice it to say, the options outlined give guidance on possible approaches to keep a deal moving forward or folding.