I'm a bit at a loss for some of the advice being given.
You simply cannot afford to go get an appraisal, nor an inspection, prior to making an offer on every potential home you like. Nor should you do so prior to making the offer on even your most cherished candidate. You could end up paying out $800 for the inspection and appraisal, and then never consummate an offer for a number of reasons outside of your control. The seller might get accept an offer from someone else while you're out doing your inspection/appraisal. The seller might decide to take the house off the market. The seller could decide not to respond to your offer, or not take any of your input in negotiating a price. Don't spend a dime before you get an offer in play. Use your buyer's agent to do the leg work on establishing value. That's one of the things you should expect them to be very, very good at!
An appraisal that comes in lower than the offer price is one of the biggest red flags you'll ever get. Do not let others convince you that it's okay, or that if you really like the house you should figure out how to buy it anyway at the offer price. That's ridiculous. Saying that the true value of a home is what a willing buyer pays for it is also ridiculous. If the value is actually lower than the offer price, then the buyer is a willing "stupid" buyer. You definitely don't want to be in that category.
First and foremost, a buyer's agent is supposed to get you the house at the lowest possible total cost, on the best terms. That means your buyer's agent should be using the appraisal to negotiate a lower price, and/or better terms, and nothing else. To suggest that your agent should somehow first look to correct the appraisal, or recommend you go get another appraisal, or help the appraiser understand where he or she made their mistakes is not representing your best interests. Only after they've used the results of the appraisal to renegotiate, should there be any consideration to remedy the discrepancy through the above means. And any remedy should only be done if the agent understands what value you see in the home above what appears to be a third party valuation.
Do not accept â€œhelpâ€ from the sellerâ€™s agent to correct the appraisal. Why is this in your best interest?
In the end, the lender is looking at the loan-to-value ratio. If youâ€™ve already negotiated what you feel are the lowest cost and terms, then any difference between the appraised value and the purchase price is going to have to come in the form of increased equity on your part (youâ€™re going to have to contribute the difference in additional down payment). When youâ€™re in this situation, after all of the above steps, then consider some of the recommendations already given on how to fix the issue. Ask the lender to order another appraisal, but be careful, this second appraisal will cost you another $350 to $400 and might only validate the results of the first one. And as Bruce said, this is the worst option you have if your goal is to continue with the purchase.
Note that you should seek legal advice, but the standard 8 page resale contract in Texas specifically states under paragraph 4(A)(1) - If the Property does not satisfy the lenders' underwriting requirements for the loan(s), this contract will terminate and the earnest money will be refunded to Buyer. If you checked the box next to this paragraph, and the one next to 4(A)(2), then with an appraisal coming in under value, your lender is going to tell you that the property doesnâ€™t meet their underwriting requirements, plain and simple. Writing something else in to the contract to effect the same result seems unnecessary, and certainly canâ€™t be done by anyone other than you, the seller, or an attorney.
From the seller's perspective as some answered (although you clearly indicated you were a buyer), no buyer in their right mind is going to accept an appraisal from a seller that the seller paid to have done to try to prove why their home is worth what they are asking. Would you?
Don't order title before selling a home. That locks you the seller into a specific title company. If the buyer exercises their legal right to choose the title company (RESPA requirement in every case), then you could be liable for any expenses a title company incurs by opening title.
Good luck, guess you found that home in Cat Mountain or Great Hills eh?