When itâ€™s time for the appraisal, youâ€™re at a crucial crossroads in the closing process. Before you can be approved for a mortgage, your house has to be appraised. The mortgage company demands an appraisal because it wants to know the exact value of the home. It needs to know if the price you have agreed to pay for the house is actually what the house is worth. If for some reason you default on the loan, your lender wants to still have a house as an asset that is worth more than the current loan.
Hereâ€™s the problem in todayâ€™s market. Appraisals can come in very low or under the actual price that you offer to pay for the house. Why is that? For one, banks are now much more stringent and conservative about the value they place on each home. Before the market meltdown of the past decade you could be pretty well assured that most appraisals would magically come in either over the sales price or exactly at the sales price. Rarely would they come in valuing the home for less than what the buyers had agreed to pay. Now itâ€™s a whole new ball game, with appraisers and banks being far more conservative.Â
Be forewarned: itâ€™s very possible that your appraiser may say your house is actually worth less than what youâ€™re willing to pay for it. If this is the case, you have four options.
Four Steps to Take if the House Appraises for Less Than the Agreed Sales Price
Go back to the seller and try to renegotiate the sales price downward to equal the same price as the appraisal.
Offer to pay the bank to conduct a new appraisal done with another appraiserâ€”one who is more familiar with the neighborhood. Maybe even get the seller to kick in some for the cost.
Bite the bullet and put more money down so that your loan amount is actually lower. A lower loan amount allows the bank to accept a lower appraisal amount on the house.
Finally, walk away. Hopefully you had a contingency put into your sales contract that would allow you to cancel the sale if the appraised value of the property was lower than the actual purchase price.