What to do when your Home Appraises too low as a Seller?

Heather Dean — Tue, 19 Apr 2022 23:13:47 +0000

Having an appraisal is required in almost all transactions that involve a lender. Having an appraisal come back under contract price can really ruin a deal. It can turn the entire process into a tailspin! What do you do when your home Appraises too low as a Seller?

If this happens to you as a Seller, what happens next?

We are seeing appraisal contingencies in about half the contracts we write these days– meaning a renegotiation has to happen if the appraisal comes back too low.⁠⁠

In the OTHER half of contracts, we are NOT seeing that appraisal contingency, meaning that buyers are agreeing to pay the difference — in CASH– if the appraisal comes back too low!⁠⁠
So why do they have to pay the difference in cash? It’s simple! The lender simply cannot lend for more than what the appraisal is, so buyers have to come out of pocket for this.⁠⁠ If the buyer does NOT have the money upfront, they would then have to terminate the contract with you as the seller.⁠⁠

Option 2 is for the Seller is to still lower the contract price even if the buyer does not have the appraisal contingency in place. It may make sense to do this instead of going back on the market. Remember, if your next buyer does not receive an appraisal at the contract price, you could be in the same position!

If there is an appraisal contingency in place, Buyer can terminate the contract and keep their earnest money.

Last option is for the Seller to come down a portion and the buyer to come to closing with some additional cash. It’s a meet in the middle option that a lot of buyers and sellers are agreeing to!
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The main takeaway here is the if there is an appraisal contingency in place, Buyer can terminate the contract and keep their earnest money. Leaving you, the Seller, high and dry and looking for a new Buyer. Looking for an agent who can help you negotiate the best options for you? Reach a S&C agent here!

The post What to do when your Home Appraises too low as a Seller? appeared first on Sage and Cedar.

What to do if your Home Appraises for Less than Contract Price?

Heather Dean — Tue, 08 Jun 2021 02:39:00 +0000

There are so many moving parts in a real estate transaction. Inspection, appraisal, financing, title, the list goes on! When one or more of these things don’t go as planned, you risk losing the home all together. So what do you do if your home doesn’t appraise for contract price?

Because home buyers are agreeing to pay more than the list price, what happens if the appraisal does not support the contract price? Let’s dig in…⁠⁠

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01. You can ask that the seller negotiate down to the appraised value: The buyer can always request that the seller negotiate down to the appraised value. If they do not have the funds to cover the difference, this may be the only option!
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02. You can agree to pay the difference between the appraised value and contract price at closing: This would be an additional out of pocket cost. Ex- Under contract at $350,000, home appraised at $340,000, $10,000 add’l out of pocket at closing.
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The buyer can always request that the seller negotiate down to the appraised value.

03. You can meet the seller halfway and ask them to come down but also pay the difference out of pocket at closing⁠⁠: This is a meet in the middle scenario where the seller comes down on price and the buyer still agrees to pay that lesser difference.
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04. You can terminate the contract and walk away from the deal: Depending on the language agreed to in the contract would determine who would keep the earnest money.⁠⁠

Deciding what to do if your home appraises for less than contract price should always involve a conversation with your agent and lender. They may have a creative way to move forward and keep everyone on track! Looking to get started with an S&C agent? Contact us here!