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Trulia San D…, Home Buyer in San Diego, CA

How does a low appraisal affect the home selling process?

Asked by Trulia San Diego, San Diego, CA Sat Mar 23, 2013

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If the appraisal on your home comes in under the agreed sales price, the buyer generally has to decide if they want to pay the difference in the sales price and appraisal price, or ask the seller if they are willing to sell the home for the appraised value or meet them in the middle. The buyers can also decide to cancel.

Depending on what type of loan the buyer was trying to obtain the appraisal could stick with home for up to 6 months. It’s a good idea for your agent to speak with the buyer's lender and agent to try and work together to keep the deal together and on track to close.

Jeff Jenkel

Coldwell Banker Residential Brokerage
0 votes Thank Flag Link Mon Oct 28, 2013
I was wondering this same thing. My husband and I are considering selling our home, but don't know what will happen if we have a low appraisal. Do you know where we could go to figure this out? I think it would be very beneficial! http://www.appraisalkeys.com/
Flag Thu Jan 29, 2015
As a licensed broker, licensed real estate appraiser, former bank executive and general contractor I understand the appraisal frustration better than most.

Agents and contractors typically see their clients homes with rosy glasses. Wanting to ignore lower sales and hold onto the higher priced ones.

Banks want to make sure (now, prior to reform not so much) want to make sure their asset, held temporarily, is protected.

Appraisers fear of being called by their license authority or a bank to defend an appraisal.

Like any industry there are great, good, okay, not so good and horrible appraisers. I always explain to my clients, even if the appraisal looks like a 'for sure' value, that an appraisal is a licensed persons OPINION of value. If we ordered 5 appraisals, most likely we would get 5 different values. Those values should be within 2-3% of each other, but sometimes, you get an out layer.

Low appraisals can freak out clients. I walk them through it. Revisit competing houses. And by the end, the buyer typically is saying - why didn't the appraiser adjust for road noise - this comparable backs to the free way. It is an opportunity to help educate clients.

David Rudd
Kindred Real Estate
0 votes Thank Flag Link Fri Oct 25, 2013
If the buyer needs a loan and his down payment is low it will be an issue, and often enough the buyers will just back out, because they feel they are paying too much for the home...
The listing agent can try to get another appraisal based on his / her initial comps.... but no matter how
you look at the issue it is going to be an issue. See some of the answers below that go into more detail.

That is one reason why the original market evaluation of an experienced Realtor, the sellers Listing agent is every sooooo important....

Good Luck to you

Sincerely yours,
Edith YourRealtor4Life & Chicago, North Shore & Northern Illinois Expert
Working always in the very BEST interest of her clients, Buyers, Sellers and
Investors alike....And always with a SMILE :)

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0 votes Thank Flag Link Sun Mar 24, 2013
It can do a number of things:

1. Blow up the deal,
2. Force the seller to lower their price,
3. Force the buyer to come up with extra cash,
4. Thoroughly frustrate everyone involved in the process.

Even more important, the ASSUMPTION that the appraisal will be low is dramatically affecting buyers:

1. Sellers are insisting that offers be submitted with the appraisal contingency removed.
2. Many buyers are being forced to bring extra cash to the closing table to make up the difference between high contract prices and lower appraised values.
3. FHA and VA buyers, who typically don’t have the cash to cope, are being forced out of the market in droves.

Here are a number of posts that deal specifically with this issue:

Low Appraisals Doom Sales
http://ebpublishing.com/index.php?option=com_content&vie…

Appraisers Struggle To Keep Pace with Market
http://ebpublishing.com/index.php?option=com_content&vie…

Appraisers Struggle To Keep Pace: Part 2
http://ebpublishing.com/index.php?option=com_content&vie…
.
0 votes Thank Flag Link Sun Mar 24, 2013
When an appraisal comes in low, if you have a loan, it can be an issue because the lender will base your value on the LOWER of the sales price, or the appraisal value. So you have the following options:

a) The buyer can pay the difference in cash, which is typical right now with so much competition among homebuyers;
b) The buyer can renegotiate the price with the seller based on the lower value;

IF THE APPRAISAL VALUE IS UNJUSTIFIABLY LOW, I can't speak for all lenders, but we have an in-house LOCAL appraisal department, who is VERY willing to review the appraisal and new comps and evidence and increase the value based on the evidence presented...

So there you go. Buyer can pay the difference in cash, seller can reduce price, or you can dispute the value with the appraiser if the lender has a system which allows it.

If they don't, maybe you should use us instead next time!

Daniel Lehman
WJ Bradley Mortgage, LLC
858-345-4725
daniel.lehman@wjbradley.com
0 votes Thank Flag Link Sat Mar 23, 2013
Every situation is different. If the buyer wants to the property and/or feels the appraisal is flawed, they may continue with the transaction. If there were multiple offers, their ability to negotiate a lower price with the seller is certainly diminished. If the property has had little activity when the offer was accepted, the buyer has more leverage.

If the appraisal is questionable, the buyers may request the appraisal be reviewed and the valuation appealed.

If you provide a few more details, I am sure you will get some very useful information.

Robert Boerner
Gecko Realty
619-977-2262
0 votes Thank Flag Link Sat Mar 23, 2013
It stalls it and sometimes stops it. When a low appraisal comes in, the seller and buy try to re-negotiate the purchase price If that fails to occur, the escrow will cancel. The seller will probably look for a cash buyer or hold off selling his/her home.
0 votes Thank Flag Link Sat Mar 23, 2013
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