If you’re like many people, you know that a home appraisal is an important part of most real estate transactions. So what can you do if yours comes back low? This guide explains.
What Should You Do if Your Appraisal Comes Back Too Low?
When a buyer wants to take out a mortgage loan to purchase a home, the lender typically sends an appraiser to determine the property’s value. If the appraisal says that the home is worth more than what the seller is asking, the lender usually has no problem allowing the buyer to borrow that amount of money.
However, if the appraisal says that the home is worth less than what the seller is asking, things get pretty sticky. Lenders don’t like to let people borrow more than a home is worth – so sometimes they offer to let a buyer borrow the same amount that the home appraised for. The buyer usually has a few options at this point. They can ask the seller to lower the price, come up with the additional money on their own, or walk away from the deal.
If you are faced with this situation and your deal is at risk because the home appraised too low, what can you do?
Most real estate agents recommend that you ask the appraiser to take a second look (through the lender, of course) or ask for a second appraisal. You can do both if you’d like. Or, if it’s easier, you may simply wish to lower your asking price or otherwise negotiate with the buyer.
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Asking the Appraiser to Review Their Report
Sometimes it’s worth working with your real estate agent to contact the lender to ask for a review. You may want to include comparable properties in the neighborhood, as well as other assets that the appraiser may have overlooked. Often, appraisers are willing to reopen files to look at new evidence that they may have missed the first time around.
Related: The things you should take with you when you leave the house for a showing
Asking for a Second Appraisal
Usually, if you can’t get the appraiser to take a second look, or if you feel that the first appraiser was biased in some way, it’s a good idea to ask the lender – through you’re a real estate agent, of course – to send out a different appraiser. However, if you do this, you will most likely be responsible for paying that appraiser’s fee. (Home appraisals typically cost between $300 and $500.)
What if You Believe Discrimination Was Involved?
It’s one thing to think an appraiser made a few mistakes, and entirely another thing to believe discrimination was involved in a low appraisal decision. If you believe that discrimination was involved, talk to your real estate agent. You may wish to file a complaint with the fair housing agency, contact the U.S. Department of Housing and Urban Development (HUD), or file a complaint with the state appraisal board. As a last resort, you may even consider hiring an attorney who focuses on fair housing issues to help prevent the same thing from happening to other people.
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