A disappointing appraisal is not a reason to give up on buying a home.
Now that we’re two months into the spring, the real estate listings and offers are popping up fast.
Springtime has traditionally always been the most popular time for listing while, according to Realtor.com’s numbers, the week between April 16 and April 22 is expected to have 16.4% more buyers than last year.
As many markets across the country slow down or even fall, 2023 is seeing some unique challenges around all things related to real estate. As demand for housing is still very high following years of underbuilding, many buyers hope to take advantage of the current price even as sellers still hope to sell as high as a year ago.
Underwhelming Home Appraisal? Here’s What You Can Do
A home appraisal, or the professional evaluation of the home after an offer has been accepted and meant to ensure that the proposed price is fair, depends on many factors. While the home’s size and location are integral its value, the final appraisal value will also be lower if there are undiscovered defects or if other homes in the area have started selling for less.
This, in turn, can create significant problems with one’s mortgage approval process as lenders will generally bring down the approved amount based on the property’s worth.
When faced with a lower appraisal, potential buyers have the option to talk with the appraiser and potentially dispute the decision. The first step is to read through the report and look out for any inconsistencies or incomplete information.
“There are sometimes errors to the processing, such as failing to include certain sources of income or incorrect comparables used in the comparison,” Joel Camino, who owns the homebuilding company Next Modular, tells Realtor.com. “In these cases, if you can provide evidence to support your claim, then it may be possible to have the appraisal revisited and a revised result given.”
If a re-appraisal refused, experts who talked to Realtor.com suggest in some cases paying for a second appraisal. While each one can cost up to $2,000, it may be an option if one has a reason to suspect that it will yield something different.
Here’s When You Should (And Shouldn’t) Walk Away From A Home Sale
In the event that the appraisal is fair, potential buyers always have the option of negotiating with the owner. If the low value is caused by a rapidly cooling market, owners may be open to accepting a lower price rather than trying to find another buyer.
“Negotiating the sale price with a seller is easier than attempting to get a second appraisal,” Melanie Hartman, who owns Maryland-based homebuying company Creo Home Buyers, told Realtor.com. “[…] As long as the appraisal is accurate, most sellers are willing to adjust their selling price to get their house sold.”
The final and most drastic step is to be ready to walk away from the purchase — along with being an ultimatum-style negotiating tactic, it may sometimes be necessary if the appraisal revealed unfairness in the accepted offer or if one will not be able to get the mortgage one needs to purchase.
“Walking away from the purchase is a drastic option that should be considered carefully,” Boyd Rudy, a Keller Williams broker from Michigan, told Realtor.com. “On the one hand, it can help to avoid a situation where the buyer is locked into a purchase that is significantly overpriced. On the other hand, it may mean forfeiting the time and money that you have invested in the purchase process.”