Low appraisals are a common occurrence in a seller’s market but, they’re a possibility no matter what the current market conditions are.
It can be heartbreaking for sellers and buyers when an appraisal comes in low but, it’s important for all parties to remain calm. It’s not a death sentence to the entire deal but, it will take some compromise and working together to get it resolved.
What are the options when a low appraisal comes in?
Lowering the price
The buyer can make up the difference in cash
The buyer can always put more money down at closing to account for the difference in the appraised value and the agreed-upon sale price.
The seller and the buyer can work to find common ground in terms of the seller lowering the price and the buyer bringing more cash to closing to account for the remaining difference. It doesn’t have to be a 50/50 split, it can be any combination as long as both parties are in agreement to the terms.
A buyer that has an appraisal contingency in place can withdraw from the contract if the appraisal comes in low. This is last resort as a low appraisal doesn’t mean a lender won’t provide a loan on the home. It just means that they will only provide a loan based off the appraised value and any shortage has to be accounted for in the form of increased cash at closing, a lower sale price, or a combination of the two.
I don’t know anyone that likes receiving the news of a low appraisal but, it is something that happens from time to time. Weighing the different options to find a win-win for both sides is always possible. It just takes keeping a level head and working as a team to achieve a successful outcome.