Marilyn Ellis, CBR, CHMS, LMS, HAFA
RE/MAX Leading Edge | 781-944-6060 | marilynellis@remax.net


Posted by Marilyn Ellis, CBR, CHMS, LMS, HAFA on 8/17/2017

A low appraisal is a possibility when youíre buying a home. This can happen for a variety of reasons. If it happens to you, donít panic! 


Once you get an offer accepted on a house you love, it may feel like a huge weight has been lifted off of your shoulders. As any seasoned homebuyer will tell you, this is only the beginning! 


It can be tough for both the buyer and the seller when a deal seemingly falls apart due to an appraisal that comes in too low. This is a common occurrence and there are ways to work around it. 


Reasons For A Low Appraisal


There are a few reasons for a low appraisal including:


Insufficient sales data for the area can often skew appraisal numbers

Lenders may only lend up to a certain percentage of the appraised value


If the appraisal comes in lower than what you offered for the purchase price of the home, youíll need to come up with the rest of the cash upfront in order to purchase the property. There are other options for you if you do come into this situation.


The Appraisal Contingency


The appraisal contingency is built into your sales contract and is a protection for the buyer, allowing them to walk away without financial burden if the appraisal comes in too low. This allows you room for negotiation on the sellerís part if they really are motivated. The contingency clause isnít a one-size-fits-all protection. Even with this clause, you could end up spending more out of pocket cash or walking away from the deal completely. Itís simply a protection.  


What If The Appraisal Is Wrong?


The appraisal can be submitted for review. The appraiser would need to explain why they didnít use comparable sales provided by the lender. The property can also be completely reevaluated. In addition, you can request a separate appraisal from your lender. The seller may even pay for the second appraisal in order to keep the deal from falling through. 


Donít Offer More Than You Think The Property Is Worth


When you base huge financial decisions on emotions, you could end up in a bad situation. Your offer that wins the house can quickly become a case of regret as a buyer. Many times in a tight real estate market, youíll need to make decisions fast. If you have a general idea of property values and work with a realtor to make an informed offer, youíll be in better shape to avoid a big headache. While you may be able to afford paying more than a house is worth, itís not a smart financial decision.       



Low Appraisals Are An Opportunity


A low appraisal should be thought of by the buyer as an opportunity to renegotiate the sale price of the home. This step in the home buying process is a protection for you as a buyer for one of the biggest purchases that youíll ever make.





Posted by Marilyn Ellis, CBR, CHMS, LMS, HAFA on 6/10/2014

A house needs to be sold three times when it is on the market. First it needs to be sold to other agents so they will want to show and sell the home. Second it needs to be sold to buyers and lastly to the appraiser. Even if the buyer is willing to pay a certain price for a home they usually need a mortgage. That means it is actually the bank who is buying the home. The bank wants to protect their investment so they do an appraisal. When the appraisal comes back low or as an under-appraisal deals can fall apart. If you are a seller or a buyer you need to know how to protect yourself from short appraisals? Here are some suggestions from Bankrate.com for buyers and sellers. If you're a buyer: -- Tell your lender to find an appraiser who comes from your county, or perhaps a neighboring county. -- Request that the appraiser have a residential appraiser certification and a professional designation. Examples include the Appraisal Institute's senior residential appraiser, or SRA, or member of the Appraisal Institute, or MAI, designations. -- Meet the appraiser when he or she inspects the home and share your knowledge of recent short sales and foreclosures that might skew the comps. "Many appraisers are just pulling up data out of MLS (Multiple Listing Service) or off the deed at the courthouse and not checking it out," Sellers says. "Most good appraisers will appreciate the information." And yes, you can speak with your appraiser; the prohibition only applies to your lender. If you're a seller: --∑Get an appraisal before you list a home. Search for a qualified appraiser in your area on the Appraisal Institute website. -- Use the appraisal to set a realistic listing price for your home. -- Give a copy of your pre-listing appraisal to the buyer's appraiser. The more professional appraisers will understand that you're just trying to add more data and another perspective. -- Question a low appraisal. There's always a chance the appraiser or a supervisor will take into account new or overlooked information.