Getting a low appraisal can be disheartening whether you’re the buyer or the seller. The difference between the home’s asking price and its current market value can make financing the purchase an issue as it’s one of the things lenders consider before approving a mortgage loan.
But a low appraisal doesn’t automatically prevent the transaction from pushing through. There are many steps you can take to get a better appraisal. Here are some that you should consider.
Causes of low appraisals
The housing market has a significant impact on a property’s market value. A surplus of homes for sale combined with few buyers can make market values drop. Conversely, a scarcity in housing supply combined with a large demand for homes can drive up real estate prices.
A low appraisal can also be due to an inexperienced appraiser. While this is thankfully rare due to the Home Valuation Code of Conduct (HVCC), it does happen. In cases such as these, data such as pending sales or simple clerical errors such as selecting similar sales but from a different area may have caused the low valuation.
Lastly, there may have been a mistake on the part of the seller in terms of pricing their property. The price might have been based on the purchase price (as opposed to referring to the current market value) or on the seller’s own sentimental attachments.
Steps moving forward
The first step to ensure that the transaction pushes through is renegotiation. The seller has no guarantee that future appraisals will be higher or that another willing buyer will come up soon. In addition, appraisals are valid for up to 180 days. As we know, the longer a home stays on the market, the more likely it will be sold for less than its asking price.
Given this, it is reasonable to negotiate for a lower price if you want to secure the deal as soon as possible. Another solution is to fill the gap between the selling price and the appraisal with cash if it’s available.
Contesting low appraisals
There is also the option of contesting the appraisal. If you are a buyer, you can make a request for another appraisal. Should you be on the selling side, you may request for a copy of the appraisal report from the buyer and discuss the dispute procedure with their lender.
Another strategy is to request that involved agents put together a list of comparable sales that would justify the price. This list can then be submitted to the underwriter with an appeal for review of the appraisal. Finally, you can always ask for a second opinion from another appraiser.
Don’t let a low appraisal dishearten you
To put it briefly, a low appraisal is a speed bump in the transaction process, not a roadblock. There are many steps that can be taken to remedy this issue. We at the Noel & Martinez Team are more than happy to help you through this process. Get in touch with us to explore all of your options.
