What Happens If the Buyer’s Appraisal Comes in Low?

What happens if the buyer’s appraisal comes in low? 

A low appraisal doesn’t necessarily mean the home sale will fall apart. You may have several options, including renegotiating the price, challenging the appraisal, bringing additional cash to closing, or using the appraisal contingency in your contract.

What Does a Low Appraisal Mean?

When you’re buying a home with financing, the lender typically requires an appraisal to determine the property’s market value. The appraiser looks at the home and comparable properties to develop an independent opinion of value.

For example, imagine you agree to purchase a home for $600,000, but the appraisal comes in at $575,000. There is now a $25,000 gap between the agreed-upon purchase price and the appraised value.

That gap matters because your lender is generally basing the loan on the appraised value rather than simply the price you agreed to pay.

This can become especially important when you’re competing for PNW homes for sale and offering above asking price.

What Can You Do When an Appraisal Comes in Low?

You generally have several possible paths.

1. Ask the Seller to Reduce the Price

One of the simplest solutions is to renegotiate the purchase price.

If the seller agrees to reduce the price closer to the appraised value, the transaction may be able to move forward without requiring you to bring as much additional money to closing.

Whether a seller is willing to renegotiate can depend heavily on the local market, the strength of your offer, and whether the seller has other interested buyers.

2. Challenge the Appraisal

A low appraisal isn’t necessarily the final word.

If you believe the appraisal overlooked relevant comparable sales, property improvements, or other important information, your lender may have a process for requesting a reconsideration of value.

Your real estate agent can help you identify potentially relevant information, while your lender can explain the process for submitting it.

3. Make Up the Difference

If you really want the home and have sufficient funds available, you may decide to cover some or all of the appraisal gap with additional cash.

However, you should think carefully before doing this. Paying substantially more than the appraised value can increase the amount of money you have invested in the property without necessarily increasing its market value.

4. Revisit the Contract

Your purchase agreement matters.

In Washington real estate transactions, appraisal and financing provisions can affect what happens when an appraisal comes in below the purchase price. The specific rights and deadlines depend on the terms of your contract and the contingencies you negotiated.

That’s why you should review your contract with your real estate professional before deciding what to do.

Why Low Appraisals Matter in PNW Real Estate

A low appraisal can be particularly stressful when you’re shopping for Washington homes for sale in a competitive market.

You may have offered more than the seller’s asking price because you wanted to compete. But if the appraisal doesn’t support that price, your lender may not finance the transaction based on the full amount you offered.

This is one reason it’s important to understand your financing, your available cash, and the appraisal provisions in your offer before you find yourself in this situation.

What Should You Do First?

If your appraisal comes in low, don’t panic. Start by:

1. Getting a copy of the appraisal and reviewing the comparable sales.

2. Talking with your lender about your financing options.

3. Reviewing your purchase agreement and applicable contingencies.

4. Discussing whether a reconsideration of value makes sense.

5. Determining whether renegotiating with the seller is realistic.

6. Carefully considering how much additional cash you would be comfortable bringing to closing.

The right answer depends on your individual transaction, finances, and contract.

The Bottom Line

A low appraisal can create a challenge, but it doesn’t automatically mean you have to walk away from the home. If you’re navigating PNW real estate, having an experienced team help you understand your options can make a significant difference when unexpected issues arise.

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