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!
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!