There are several reasons leading to a low appraisal. You shouldn’t be surprised as it can happen during a hot, cold or neutral market. Usually it is caused by artificially inflated prices contributed by several offers and deteriorating market value caused by low demand.
There are a few solutions you can use when a low appraisal becomes an issue. Here’s what you should consider.
Buyer Pays the Difference
If the low appraisal affects the loan-to-value ratio, the lender will not offer the full amount of loan to the buyer. Not to say that the lender will completely reject the loan offer, but the loan amount will be based on the agreed loan-to-value ratio on the appraisal. Therefore, if the seller won't lower the price and the buyer wishes to proceed with the purchase, the buyer will have to pay the difference.
Seller Decreases the Property Price
If the low appraisal causes the house to be overpriced or inflated, the seller should lower the price. In this win-win situation, both buyer and lender are satisfied as the buyer gets a lower price, while the lender gets to offer a less risky amount. The seller isn’t necessarily a winner in this situation, but he or she still gest to sell the property for a fair market price.
Reassess the Appraisal
If you are not satisfied with the low appraisal and you believe it is justifiable to reassess the appraisal, you can request another appraisal. Your real estate agent can also pull comps in the area to ensure the appraisal is accurate.
A low appraisal doesn’t have to sink your deal when you are trying to sell your home. Instead of letting it hurt the chances of selling your home, talk with your real estate agent and put together a plan. He will know how to ensure you get the best possible deal, even with a low appraisal.