What Happens if the Appraisal Comes in Low??

The appraisal is a key part of a transaction when the buyer is utilizing lender financing.

As part of the process the lender will require a licensed appraiser tour the property and provide a written report to establish an opinion of value. This usually happens 2 or 3 weeks after the offer is signed. Many lenders will not order the appraisal until after the p and s agreement is in place.

In the event the appraiser comes in lower than the agreed sales price the transaction financing could be denied thereby blowing up the deal.

The buyer might have the ability to make up the difference by putting down more cash. This makes it simple and keeps everyone happy.

Conversely the Seller might just agree to the appraiser's value and agree to reduce the sale price. This absolutely keeps the buyer happy.

The Seller and Buyer could negotiate to meet somewhere in the middle to keep everything on track.

If neither party is willing to adjust the buyer could appeal to the lender and explain why the appraisal report is wrong. Perhaps on second look the appraiser will reconsider the valuation.

Another option might be for the Buyer to start the mortgage process with a new lender and therefore a new appraiser. Perhaps the next appraiser will come to a higher number to make the deal work.

If none of these options are workable the parties will probably agree to part ways with the Seller going back to market to find a new buyer.

When you are a buyer making an offer or a Seller considering an offer it is always a good idea to think about how the appraisal might impact your ability to successfully close.

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