Here’s what you can do if the house appraises below the sales price.

Today I’m talking about appraisal concerns you might have. We’re in a super hot market right now: Demand is high, supply is low, prices are rising, and occasionally we run into instances where a house will sell for more than the appraiser valued it. What happens in that situation, and what do you do as a buyer and a seller?

Believe it or not, we’re seeing some instances where buyers are buying homes regardless of the appraised value. Some are agreeing to pay a certain amount above the appraised value. An appraiser will come up with a valuation based on other sales in the area, and that poses part of the problem. The appraisal is based on history and homes that have sold in the past. In a rising market, prices are going up, so when you’re looking backward, the prices are a little bit lower than what’s selling today.

“We’re seeing buyers buying homes regardless of the appraised value.”

In today’s market, three things can happen if the house appraises low:

1. The buyer can renegotiate the price. If you go under contract for $400,000 and the house appraises at $390,000, you can go to the sellers and negotiate to pay $390,000. As a seller, you have the option to drop to $390,000 or you can stay at the contracted $400,000.

2. The buyer has the option of canceling that contract if it doesn’t appraise. You can walk away if the seller refuses to drop that price.

3. The buyer agrees to pay the additional money as cash at closing. The bank will finance the house based on $390,000. That can make a big difference if that buyer is putting 3% down on a $400,000 house—that’s $12,000. If they have to bring another $10,000, that’s quite a big difference. If you’re a negotiating seller and there’s an appraisal contingency, it’s less of a concern if they’re making a large down payment.

If you have any questions, please reach out to me at (706) 621-6085. Have a great day.