One of the most unexpected challenges homebuyers or sellers can face is a low property appraisal. When an appraisal comes in below the agreed-upon purchase price, it can create complications in the buying or refinancing. But don’t despair; there are proactive steps you can take to combat a low appraisal and keep your transaction on track.
Review the Appraisal Report
Before making any decisions, scrutinize the appraisal report for errors. Check for mistakes in square feet, the number of rooms, or overlooked amenities. Even minor oversights can impact the final value.
Provide Additional Comparables
Appraisers use comparable sales (or “comps”) to determine the value of a property. If you believe the appraiser used poor comps, provide better ones. Collect comparable house sales information by working with a real estate agent.
Highlight Home Improvements
If you’ve made significant updates or renovations to the property, ensure the appraiser is aware. Offering a detailed list with costs and dates can demonstrate added value.
Request a Second Opinion
If you believe the appraisal is seriously flawed, consider getting a second appraisal. While this will come at an additional cost, it could be worth it if the valuation is more aligned with expectations.
Negotiate with the Buyer
If you’re the seller and the buyer’s financing falls through due to the low appraisal, consider renegotiating the price. While not ideal, it may be a more favorable option than letting the sale fall through entirely.
Challenge the Appraisal
While not consistently successful, you have the right to challenge an appraisal you believe is inaccurate. Write a detailed letter to the appraiser’s company explaining why you believe the valuation is incorrect.
Consider Alternative Financing
If the low appraisal affects a buyer’s mortgage prospects, they might seek alternative financing. Different lenders use different appraisers, so switching could yield a more favorable result.
Remain Calm and Objective
It’s natural to feel frustrated or even offended by a low appraisal. Keep in mind that the appraiser is delivering a neutral, market-based opinion. Separate emotion from the process and focus on the facts.
Conclusion
In conclusion, it’s important to remember that a negative review isn’t necessarily the end of the road. Buyers and sellers can navigate the situation effectively by understanding the reasons behind the low value and taking proactive measures. Through negotiation, gathering more data, or seeking a second opinion, avenues are available to bring the transaction to a successful close.