Ways to Deal with a Low Appraisal

by The Bitt And Beliveau Team 02/02/2020

Photo by Light And Dark Studio via Shutterstock

In a seller’s market, comparable sales and competition can drive up a home’s price. This is especially true in a seller’s market where offers from multiple buyers try to outbid each other. And, while this sounds like a fantastic deal for the seller, a low appraisal can kill the deal.

Many variables affect appraised values. Some of these include artificially inflated prices from seasonal activity, rising market values, foreclosures or short sales among the comparable properties, increased or decreased supply and demand, overlooked pending sales data, mistakes made by or inexperience of the evaluators, etc.

What do you do?

  • The seller can lower the price. While this is the least preferable by home sellers, if it means the deal goes through and if time is of the essence, it’s certainly an option. The seller can offer this in exchange for the buyer paying some of the closing costs.
  • The buyer can increase their down payment. The lender typically cares about loan-to-value, so if the buyer can increase their cash in, you might save the deal.
  • A seller might offer to carry a second, approved mortgage on the difference.
  • Dispute the appraisal or order a new one. The seller can request a copy of the appraisal from the buyer. Then, you or the buyer can contact the lender and dispute the appraisal. Only the lender can require and insist on a new appraisal. Ask your agent to supply a list of recent comparable sales to justify your price and submit it to the buyer’s underwriter for a review.

A well-written contract requires the seller to release back to the buyer any earnest money deposited at the time of the contract. You can then put your home back on the market. As long as the appraisal was not for an FHA loan, you can hope for a better appraisal next time. FHA loans connect appraisals to the property, so any new FHA buyer would end up with the same appraisal as the first buyer.

The best way to avoid this is to follow your professional real estate agent’s advice when setting your home’s price. They follow the market trends, know the neighborhood, and have the pulse of what the market can bear.

About the Author
Author

The Bitt And Beliveau Team

Bob is known for giving clients his undivided attention. He takes the time to listen, educate, and advise while meeting individual needs for both sellers and buyers. He understands how busy we all are and makes every effort to maximize your time.

Bob had been with the Century 21 system for over 30 years and is a member of the Century 21 Master’s Hall of fame, a Centurion producer since 1992 and award winner of the coveted President’s Award.

In July 2019 Bob joined Berkshire Hathaway HomeServices Commonwealth Real Estate, a name revered worldwide and has stood for strength, integrity, and trust. At the same time Bob teamed up with his mentee Leanne Beliveau to form the Bitt and Beliveau Real Estate Team. Bob is passing on his vast knowledge and skills and Leanne now joins him in working in your best interest. Together we have a complimentary skill set that is unparalleled. You will be impressed with our level of service and professionalism.

Bob has served as President of his local Real Estate council of the Greater Boston Real Estate Board, coached both Arlington Little League and Arlington Youth Hockey, and is a member of the Touchdown Club of Arlington. He enjoys golf, the Bruins, cross fit, and obstacle racing.

As a former competitive gymnast Leanne spent ten years as a judging official for USA Gymnastics. She obtained her BS in psychology from Endicott College, as well as an MA in psychology from Brandeis University. Enthusiasm, knowledge, and transparency are her aim when working with clients. She prides herself on being attentive to her client’s needs and wants, her exceptional communication skills, and the desire to get the job done in a proficient, prompt, and professional manner. She particularly enjoys helping home buyers find the right homes for them and guiding them through the buying process.

In her spare time Leanne enjoys spending time with her three-year-old daughter Bellamy, reading, the Bruins, and stand-up comedy.

We are never too busy to service all of your real estate needs, so contact us today at 781-454-9900 or 617-893-1061.