That’s the worse. Everything is looking good on purchasing a home until the appraisal comes back. You’ve agreed to pay more than the house is worth.
The National Association of Realtors states that 1 of every 10 real estate agents reports that low appraisals terminated a sale.
Or maybe you’re a seller and this has happened to you. And now the buyer wants you to reduce your asking price. Of course, as a seller, you’re thinking, if the buyer really wants it, they will come up with the extra funds. But it also depends on what type of market we’re in. In a multiple offer situation, you certainly might be able to find a buyer willing to pay above the appraisal price, but in a buyer’s market, that buyer would simply find another house.
Maybe you’re refinancing and the home didn’t come in as high as you needed it.
Whatever the case, there are options to challenging an appraisal.
Have the lender put pressure on the appraiser.
If the lender is the one getting the loan for a buyer, they will want to get the best deal for the buyer but that doesn’t always mean challenging a low or high appraisal. Yes, this could go both ways. If the appraisal comes in high, the seller may want to go back and try and get more money. OF course, once the buyer and seller agree to the price, the seller cannot change the price in their favor. But if the price is lower than the asking price, the seller may reduce it or ask for the difference in cash.
[Related: 5 Things to Know about the Home Appraisal]
Give the appraiser a reason to change.
Simply saying, “you’re wrong” won’t cut it, but telling them they missed a basement, add-on or other high-end features may make them re-evaluate. You have to prove they missed something or grossly undervalued something. Compare your home with a similar home and if theirs sold higher than yours, offer proof that your house should be higher as well.
Highlight any changes you’ve made.
Perhaps the appraiser didn’t know you just put in a $20,000 heated floor or finished the basement. Many tax assessments are written up before home improvements are made and if the appraiser is lazy, they may miss these items altogether.
Consider a second opinion.
You can also attempt to change the appraiser’s mind by getting one of your own. Of course, you’ll have to pay for it yourself but it may be worth it. If you find errors or problems with the initial appraisal, you can have the original appraiser issue a revision or for the lender to order a new appraisal. This doesn’t guarantee a change but it can greatly affect the original appraisal and help you accomplish the end goal for all.
Have a different scenario? Give us a call! We’d be happy to help find a solution that works for you and your buying or selling situation.