{"id":32848,"date":"2022-08-31T18:01:51","date_gmt":"2022-09-01T01:01:51","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=32848"},"modified":"2022-09-07T13:13:19","modified_gmt":"2022-09-07T20:13:19","slug":"buyer-low-appraisal-buyer-options","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-low-appraisal-buyer-options\/","title":{"rendered":"From Paying Up to Walking Away \u2014 Your Options For If The Appraisal Comes In Low"},"content":{"rendered":"

You found the perfect house \u2014 and to be sure you got the contract, you met the seller\u2019s asking price or even bid a little higher than asking. Once you have the purchase agreement in hand, you might think there are no more obstacles in your way, but the home still has to appraise for the amount you agreed to pay for it.<\/p>\n

Before the pandemic created a hot market, about 8% of appraisals came in lower<\/a> than the offer on the home. The so-called appraisal gap began rising in frequency around July 2020, and by June 2021, there was a gap between sales price and appraised value in one-fifth of all home sales requiring financing. Yikes.<\/p>\n

The good news is that the number of purchase transactions with appraisal gaps started sliding back to its expected range at the end of 2021, according to CoreLogic, a company that collects and analyzes real estate data. The bad news is that you still have an 8% to 10% chance<\/a> of encountering a low appraisal.<\/p>\n

Understanding your low appraisal options as a buyer is crucial. Selecting the best option could be the difference between making a costly financial mistake and losing the home you\u2019ve set your heart on.<\/p>\n

To shed light on your options when the appraisal is lower<\/a> than desired, we talked to a seasoned real estate agent and two certified appraisers with a combined 50 years of experience in the appraisal industry.<\/p>\n

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What is a low appraisal?<\/h2>\n

When you\u2019re financing your home purchase with a mortgage, the lender wants to make sure the property you\u2019re buying is worth what you\u2019re paying for it. The lender will hire an independent expert to appraise the home<\/a>, aka decide the fair market value of the home<\/a>.<\/p>\n

The appraiser will compare the home you want to buy with homes in the area that have recently sold. These are called comparable sales<\/a>, or comps, because they should be similar to your home in terms of size, age, location, and condition.<\/p>\n

To get the mortgage loan amount you will need to purchase the home with the size of down payment you want to make, the home must appraise for at least the price you agreed to pay for it. Your lender will use the lower amount between the purchase price and the appraised value to determine how much money they will lend. If the appraised value is less than the contract price, you\u2019ve received a low appraisal.<\/p>\n

Appraisers dislike the term \u201clow appraisal,\u201d by the way. \u201cThe term \u2018low appraisals\u2019 assumes the appraiser is wrong,\u201d says Ben Coheen<\/a>, who has been appraising homes in the Twin Cities, Minnesota<\/a> area for 21 years. \u201cWe’ve been in an unprecedented market with low inventory and buyers offering tens or hundreds of thousands of dollars over the list price. In some cases, supporting this higher price is simply unattainable.\u201d<\/p>\n

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Why do appraisals come in lower than the purchase price?<\/h2>\n

There are many reasons for a home to appraise for less than the contract price. For example:<\/p>\n