If I put an offer in on a house and then the bank appraisal comes in for less, what happens?

Asked by Glenda, 01803 Fri Jan 9, 2009

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Judy Boyle, Agent, Marlborough, MA
Fri Jan 9, 2009
Hi Glenda,

The prior answers are accurate but please do not take any one opinion you receive here as "THE" correct one. Every real estate transaction is unique and should be treated as such. Hopefully you have a real estate agent working for you and will help you determine what is a reasonable offer based on the exact same comparables that an appraiser will be using.

Banks are indeed scrutinizing every dollar they lend. They are also holding the appraisers accountable for every detail of their appraisal. This does not mean that it is the appraiser's fault if the appraisal comes in for less than the agreed-upon sale price. It could possibly mean that the house is selling for more than the most RECENT comparable sales.

Recently, I have had two transactions in which the appraisal came in lower than the agreed-upon sale price.

In the first situation, the seller came down on his price....but that was only because it went under agreement within three days of going on the market...and for above HIS asking price.

With the other situation, the buyer had to come up with a larger down payment because the seller would not lower his price...and the buyer definitely wanted the house.

The best advice I can give you is to be prepared for anything! In this market, especially here in Massachusetts (where the market is like the weather) what applies to one may not apply to another!

Good luck!

1 vote
Territory.c…, Agent, MA,
Tue May 29, 2012
Every transaction is different but it is possible for you to still move forward with the deal if your mortgage is for less than the appraisal amount. Otherwise if the appraisal came back low and they don't give you your mortgage you should be protected under the contingency so check the language. Perhaps the seller would consider renegotiating the price. Ask your buyers agent and attorney.

Good luck!
Web Reference:  http://territory.com
0 votes
Kevin Vitali, Agent, Tewksbury, MA
Tue May 29, 2012
The short answer is you would not get approved for the mortgage.

What do buyers typically do?

1- Go back to the seller and renegotiate the purchase price to the appraisal price.
2- Cough up the extra dough to cover the gap, though not all banks would accept that.
0 votes
Bill Eckler, Agent, Venice, FL
Fri Jan 9, 2009

With the real estate market on the decline this is becoming fairly common. Banks will not finance a loan for a home that does not appraise for the sale price. This is one reason why it is important to use the skills of a real estate professional so that your offer is a true reflection of the current real estate market.
0 votes
William Rudge, Agent, Boiling Springs, PA
Fri Jan 9, 2009
Glenda, at this point the mortgage is not approved. You have the option to pay the difference from your end or ask the seller to reduce the price accordingly. You may seek a second opinion on the appraisal but it most likely would not do you much good as the bank is the one requesting the appraisal not you. You should sit with your Realtor and look at comparable recently sold homes in the area. Your Realtor should share these with your mortgage originator and they in turn can provide those to the appraisor. I have some changed but not many. Good luck.
0 votes
Scott Godzyk, Agent, Manchester, NH
Fri Jan 9, 2009
If you have legitimate comps that state there is a mistake in the appraisal you can ask the bank to reconsider, order another or have the appraiser correct it. If it does not come in because all the comps are lower, than the seller has to lower the price to the appriased value, you come up with the difference or you ask for your deposit back as the bank will not loan for more than the assessed value. good luck with your purchase
Web Reference:  http://www.ScottSellsNH.com
0 votes
Linda Slocum,…, , Santa Clarita, CA
Fri Jan 9, 2009
Ask to review the appraisal.

There are times when appraisers either do a shoddy job or make incorrect assumptions for an area, and these can often be corrected by an internal appraisal review.

We just successfully disputed an appraisal that came in $40k too low (over 10%) because the appraiser not only selected non-comparable properties, he also altered the square footage of these homes on his appraisal report to support this lower value. Review the comps and the square footage data in detail with your realtor and lender, and make sure there are no errors.

If the appraisal turns out to be correct, there's not much you can do other than bringing in more cash to close the transaction.

Good luck!
0 votes
Dallas Texas, Agent, Dallas, TN
Fri Jan 9, 2009
Your lender would not authorize loan approval for the purchase. Why a buyers agent needs to comp the property determine true value and if overpriced work on front side while submitting an offer than wait till after executed contract approved by both parties.

If in middle of contract obligations appraisal which costs buyer approx. $300 - or + is less than agreed purchase price either contract need amendment for price reduction or search for another home.

GOOD buyers agent does much leg work prior to showing & eliminates from any home tour overvalued properties
Web Reference:  http://www.lynn911.com
0 votes
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