It’s not unusual for a home appraisal to come in lower than expected, even if the buyer and the seller agreed on the purchase price and the lender had preapproved a loan based on that price. Lenders often approve loans based on preliminary information, but the final appraisal determines the maximum they’ll lend.
Fortunately, a “short” appraisal is not a dead end. Understanding your options can help you decide what’s best under the circumstances.
Ask for a reconsideration
You can request a reconsideration of the property’s value if you believe the appraisal was inaccurate. Think of it as an appeal to the results of your home appraisal. For instance, you can provide comparable sales of similar properties in the area, point out factual errors about the property’s size or features or provide documentation of upgrades you believe the appraiser may have overlooked.
While appraisers are not required to change their opinion, a well-supported argument can sometimes result in a higher appraisal. Here are some potential options.
Renegotiate the deal
You may negotiate with the seller to lower the purchase price or at least split the difference between the appraisal and the price you agreed upon. Sellers who are motivated to close may be willing to compromise rather than risk the deal falling through.
Increase your down payment
You can also choose to cover the difference between the appraised value and the purchase price. Increasing the down payment lowers the amount you need to borrow and may help meet the lender’s requirements.
Use your appraisal contingency
If your purchase agreement includes an appraisal contingency, you may have the right to cancel the contract after a short appraisal. This allows you to cancel the deal without losing your earnest money deposit.
As a potential homeowner, you’re likely to encounter such hurdles during the purchase process. That’s why having legal guidance is prudent. It can help you effectively get around any unexpected issues while protecting your interests throughout the transaction.