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2018-02-03 21:18:05
Three (3) Ways to Deal with a Low Appraisal

Your home is under contract and it is a HOT market!  The first week you were on the market you received multiple offers that put Buyers in a bidding war for your home.  So, to get the most out of your investment you went for the highest offer. 

Now, there is a new problem the appraisal came in too low for the purchaser to complete the sale at your agreed price.

What are your options now?

Well, you could let the deal crumble and start over or take a deep breath and dive into the following tips to salvage the Sale of your home. Here are three EASY ways to keep things on track.

1. Lower the Price and Renegotiate Other terms of the Contract

The quickest and easiest (and probably the most obvious) way to make sure that the sale goes through is to renegotiate the purchase agreement with a lower sales price to reflect the appraisal value.  The bottom line here is that normally if it will not appraise now, a new contract with a new appraiser will run into the same problem.  Since the Seller's net returns are likely to be lower, another option may be to remove other incentives in the contract, that were included in the original sales price like Seller contributions to closing costs, included appliances, and/or accessories to the sale. Doing so may take enough of the sting out of a lower sales price and this way, both you and the Buyer compromise.

2. Increase the Down Payment

If the Buyer truly loves the home, and the Seller refuses to lower the price, it may be possible for the Buyer to pay the difference between the purchase price and what the bank will lend. Increasing the down payment will bring the sales price in line with the appraised value.

There is a danger in this though. Paying more up front could create a loan to value problem (the amount of the loan plus the larger down payment is greater than the appraised value of the property) and the loan may not be approved by the lender.  Even if the sale is approved with a larger down payment this may mean the Buyer is entering the home in a negative equity position keeping him 'trapped' in the home for the future with the risk of loosing money if a need to sell the home arises prior to having accumulated any new appreciation in the home.

 3. Challenge the Appraisal:

A Seller and/or their Listing Agent may be able to help by challenging the appraisal.  This is particularly true if they have inside information on a recent sale in their neighborhood or anything that was missed by the appraiser that would help to support more value in the subject property.

Also, if there are pending sales in the area that the Seller or their Agent happens to have a timeline on the anticipated closings of other area properties, something may be coming soon that could be used to raise the appraisal price once those homes close. In cases like these an new appraisal can be obtained and the only thing the Buyer and Seller would need to do is extend the contract and wait for those closings to happen.  Any one of these items or events can often go a long way toward helping an appraiser reconsider.

Remember, the appraiser may not live in the neighborhood; he or she may not know the area very well and will most likely welcome the 'insider' input from you or your Agent if there is information that can be used to substantiate a higher price.

In summary, a low appraisal doesn't have to be a deal killer. Before you decide to walk away, be sure you have looked at all the angles to keep the sale on track chances are very good that your first offer will be the best offer and if you are stuck with the numbers, the only option will be selling at a lower price or waiting sometimes months or years into the future in the hope of a market improvement. Remember the old cliche' ' a bird in the hand ... beats two in the bush.

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2018-02-03 21:18:05
Three (3) Ways to Deal with a Low Appraisal

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