What if my home does not appraise for the loan amount of the buyers? What are my options?

Asked by Allison, Knightdale, NC Tue Jul 3, 2007

Selling our home, and appraisal may be too low. Buyer needed a 103% loan, so If it is less than the loan amount what can I do! I am so nervous. We need to move by 7/14/07.

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Bruce Lynn, Agent, Coppell, TX
Tue Jul 3, 2007
1. The buyer can come up with more cash to cover it.
2. Seller can lower the price to match appraisal.
3. Start over with a different lender or perhaps use a different appraiser.
Web Reference:  http://www.teamlynn.com
2 votes
Keith Sorem, Agent, Glendale, CA
Tue Jul 3, 2007
One more thing...
If you had multiple offers, make sure that the appraiser is aware of them. Multiple offers prove that other buyers thought your home was a similar value.
Also, occasionally there are descrepancies in square footage of living area. Have any additions or alterations been made?
Are all of the comps "truly" comparable (condition inside and out). Have you made any improvements that the appraiser may not been aware (central air, copper plumbing, etc.)
Good luck!
1 vote
Keith Sorem, Agent, Glendale, CA
Tue Jul 3, 2007
Allison, both Irina and Bruce have provided some excellent suggestions.
Here are some ideas that might help. (I do not know your market, so discuss with your Realtor).
Normally appraisers use "closed sales" as comparables. Those are properties that have closed escrow and have new owners. The theory is that there properties, since the escrow is closed, actually are the most accurate assessment of value.

Properties that have sold generally also have these characteristics:
1. Escrow if normally about 30-60 days.
2. Market time is normally about 60-90, but varies widely.
If the above were true that means that homes that have sold are actually four or five months old.
That means if the market is trending up, the prices at which they sold might be lower than the current value.
If the market is trending down, the prices might be higher than the current value.
Most areas of the US are experiencing a downward trend, but there are area, pockets, that have trends different than the local area.
Your Realtor should have met with the appraiser at the home for the appraisal and provided comparable sales to the appraiser. Some Realtors only use the MLS, which may not have all the data needed.

Calls to make:
1. Talk with the Realtor about the comparables used. Sometimes there are "better comps" that have not yet closed, but are in escrow, that might support your price. Your Realtor will have to contact agents with Pending Sales to find out that information. It's work, but it's worth it.
2. If your Realtor is not helpful, as to speak with the Broker. The Broker generally has more experience and may be able to assist you. Knowledge is key.
I hope this is helpful.
1 vote
Richard M. J…, , Sherman Oaks, CA
Sat Oct 20, 2007
Hi Allison, you can either reduce your home price or offer seller financing. good luck.
0 votes
Kimberly, , Chapel Hill, NC
Sat Oct 20, 2007
You're in a tough spot if it doesn't appraise for 103% and lenders are more cautious these days. You have a couple of choices that may work, reduce your price to the appraised value, ask the buyers to come up with some cash from a family member, finally check the appraisal to make sure your house received value for extras like hardwood floors, granite, garage etc. that the comps may not offer. Good luck, it'll probably work out fine.
0 votes
Chris Roark, , Raleigh, NC
Fri Aug 17, 2007
I understand you concern. 103% loan is of concern in today’s market. Appraisals are opinions of one person at one point in time based on information on hand. Like suggested below your Realtor should be able to help the appraiser with information they gather from the CMA which was completed when you placed your property on the market.
Understand however that the market changes and CMA should be updated at least every 30 days. As long as you did not overprice the property you should be able to get the appraisal to the want it needs to be.
Web Reference:  http://www.chrisroark.com
0 votes
Ken Christian, , Raleigh, NC
Mon Aug 6, 2007
Option one is to challenge the appraiser's opinion. Notice I said opinion. The value of a home is very subjective and if you believe that the value quoted by the appraiser is incorrect, you can ask how the value was determined. Your Realtor can show the appraiser how the list price was arrived at and what comps were used to back up your position. If the comparisons were accurate and can be verified, the appraiser should either revisit the assessment or be able to show why the appraisal came in where it did. It may be that some factor was overlooked or inaccurate in the comps or in the appraiser's determination. If the appraiser holds firm with the determination, then go to the lender and plead your case and why the appraisal should be higher. Have your facts and figures available for their evaluation.
0 votes
Irina Netcha…, Agent, San Marino, CA
Tue Jul 3, 2007
Hi Allison,

Selling a home can be a nerve wrecking experience. Bruce, below, gave you some of the standard options.

Having said that, sometimes, your agent can appeal an appraisal if he/she feels that the comparables justify the selling price. Your real estate agent should contact the appraiser, lender and the underwriter and submit the comparable sales to them.

The underwriter can request a review appraisal to take place if they feel that the comparables warrant it.

Be persistent!

I just closed a sale where the appraisal came in $100,000 less than the $1,050,000 purchase price. Armed with comparable sales and lots of phone calls, we brought the price in at $1,050,000.

Good luck!!!
0 votes
James Hsu, Agent, Bothell, WA
Tue Jul 3, 2007
If the buyer's used a financing contingency in the purchase and sale, there should be a section in it that covers what your options are if the appraisal does not come in at value. Your agent should be able to explain the specifics of the financing contingency for you.
0 votes
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