In an appreciating market like the one we’re in right now, low appraisals can be an issue. What happens when the appraised value comes in below the agreed-upon contract price? We’re examining the answer in detail today.
The first thing our listing agents do before the appraisal even happens is put together an appraisal package. We pull numbers from recent, comparable sales, list all of the property’s upgrades, and detail what we feel sets your property apart from the competition so we can get ready for the appraisal.
Let’s say the agreed-upon contract price was $600,000 and the appraised value comes in at $585,000. We now have a $15,000 gap to examine. What are the next steps?
Once we have the appraisal report in our hands, the first thing we check for is human error. It’s not uncommon to find a few typos, especially right now with as many appraisals that are happening in today’s market with so many purchases and refinances. Then we check to make sure they considered the correct comparables and gave you the proper value for the upgrades the property has.
If that all checks out, the next step is to make a rebuttal. It’s a challenge to the underwriters and appraisers. Maybe they didn’t consider a property that had just closed. Recently, a property closed that supported the value of one of our recent sales between the time we accepted the offer and the appraisal. We had to provide them with new information that allowed the higher value to come in, and it eventually led to a higher appraisal.
If the challenge is unsuccessful, we’ll head back to the negotiation table. At that point, one of a few things can happen. The seller could drop the price to $585,000, the buyer could come up with $15,000 in cash to make up the difference, or we meet somewhere in the middle. In the rare case that we can’t come to some sort of agreement, both sides can cancel the transaction, deposits are sent back, and we go our separate ways.
We take a lot of pride in our work and making sure that we get you into a good property that will appraise. If you have any questions about the appraisal process or real estate in general, don’t hesitate to reach out via phone or email. We look forward to hearing from you soon.