Low Home Appraisal and Your Options as a Buyer
Question: Does a low home appraisal mean the deal is totally off?
We see this happen a lot. Sometimes the seller is a little too aggressive with their asking price and the buyer gets emotionally attached, so they start bidding up. Then, all of a sudden the appraisal comes in and the price is not supported.
When a low appraisal happens you have a couple options.
Low Home Appraisal: First Option
The buyer can decide to bring the additional cash. So say, you’re going to buy the home for $220,000 and you’re going to put 5% down, and it only appraised for $200,000. You would have to put your 5% down plus the $20,000 difference in the appraisal. That’s on option.
Low Home Appraisal: Second Option
A lot of the times, the buyer and seller can renegotiate the price. For the seller, it’s pretty hard to sell the home above the appraised value. A lot the time, the buyer and seller will back together an renegotiate a new lower price.
Maybe the seller was contributing some money toward closing costs for the buyer. They may take that away and drop the price. There’s a lot of different ways. Usually, the real estate agents come together at this point and try to keep the deal alive.
If you’re putting excess money down, say you’re putting 20% down. Then it may not affect you. You can just get a lower down payment loan and use the rest of the money to cover the difference.
So, don’t give up just because an appraisal comes in low.
Learn more about Low Home Appraisals.