Wes Asks… I have already negotiated the price on the home I am purchasing but the appraisal came in lower than the price. How can I challenge this value?

If the actual value of the home you are looking to buy came in lower than your preapproved loan amount, the lender cannot approve the loan under the original contract terms. Therefore, this could hinder your chance to get the home that you want to buy.

Luckily for you, there are a few ways in which you can challenge a low appraisal:

Find out what type of appraisal took place. Appraisals can differ based on the way in which they were performed:

  1. Electronic – AVM – Automated Valuation  –  An appraisal done via Internet search of comparable homes. The value of your home is determined based on information readily available on the web and without actually visiting your home.
  2. County – Often times called a “drive-by” appraisal, this is when a picture of your home is taken and compared to area homes based on its curb appeal and county records
  3. Traditional – A traditional appraisal is when an actual appraiser enters your home and collects all the information needed to compare it to other area homes

If an appraisal has come in low, you can request to know what type of appraisal was done and if there are comparables available to submit a reconsideration of value to the appraisal management company.

Negotiate a new deal. Typically a buyer would be excited about an appraisal coming in low because they automatically assume that they can get the home for less than they previously agreed upon. But the reality of things is that it is the seller who has the final say. To combat a low appraisal, come up with a new price that the seller will accept. This way, you’ll both be happy!

Pay extra money. If you are faced with a seller who is unwilling to agree to a new price, you may just have to pay a little extra cash and get creative with how you do so. Because the lender will only lend based on the appraised value so if you agree to a different price you will have to pay the extra money out of pocket.

Terminate the contract. When all else fails you may cancel the contract. This is assuming that you have an appraisal contingency written into your contract.

Make sure you are working with a good real estate professional to help you negotiate a new price and a good mortgage professional to assist you in the negotiation for new loan terms.  




Meet Cheryl!

About Cheryl

As a successful business owner and community leader, Cheryl Braunschweiger is known and respected for getting things done with a degree of skill and enthusiasm that bring out the best in those around her - colleagues, clients and friends. The name of her business, ALMC Mortgage, reflects Cheryl's philosophy and personality. She says it stands for All Loans Must Close –a reflection of her determination to do whatever it takes to serve her clients. Cheryl has been in the mortgage lending business for 20 years. Read More About Cheryl
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