What to do When Your Home Appraisal Comes in Low: A Step-by-Step Guide

Navigating the real estate market can be an exhilarating journey, but it often comes with an unexpected hurdles. One such hurdle is a low home appraisal. Whether you're a seller or a buyer, a low appraisal can throw a wrench into your plans. But don't worry; understanding why this happens and knowing your options can help you turn things around. In this guide, we'll walk you through what to do when your home appraisal comes in low. 

What is a Home Appraisal? 

A home appraisal is an unbiased estimate of a property's value conducted by a licensed appraiser. This estimate is crucial for lenders to determine how much money they can lend to buyers. When an appraisal comes in lower than the sales price, it can cause significant issues, especially if you're relying on a mortgage to close the deal. 

Why Do Appraisals Come in Low? 

Several factor can lead to a low home appraisal:

1. Market Conditions: Fluctuations in the real estate market can affect property values.

2. Comparable Sales (Comps):  Appraisers use recent sales of similar properties to determine value.

3. Home condition:  Needed repairs or outdated features can negatively impact the appraisal. 

4. Appraiser Subjectivity: Different appraisers might have varying opinions on value, especially if they are not familiar with your neighborhood. 

Steps to Take When Your Home Appraisal Comes in Low

1. Review the appraisal report carefully. Look for errors or omissions that might have led to a low valuation. Compare the comps used in the report with other recent sales in the area. If you find discrepancies, gather evidence and prepare to dispute the appraisal. 

2. Request a reconsideration of value.  Work with your real Estate agent to request a reconsideration of value. Provide additional comps, evidence of recent upgrades, or any other relevant information that might support a higher valuation. This request must be back with solid evidence to be considered. 

3. Negotiate with the buyer/seller.  If you're the seller, you might need to negotiate with the buyer to lower the sales price or offer to cover some closing costs. Buyers, on the other hand, can ask the seller to reduce the price to match the appraisal. 

4. Consider a second appraisal.  If the initial appraisal seems significantly off, you can request a second appraisal. Be aware that this will come at an additional cost, and there's not guarantee the second appraisal will be higher. 

5. Change lenders.  Sometimes, changing lenders can lead to a new appraisal, which might result in a different valuation. This option should be considered carefully as it can delay the closing process and involve additional costs. 

6. Increase your down payment.  Buyers can bridge the gap between the appraisal amount and the sale price by increasing their down payment. This solution requires having extra funds available and can be a significant financial strain.

Steps to Prevent Low Appraisals

1. Stage your home effectively: Ensure your home is in its best condition before the appraisal 

2. Provide comps to the appraiser: Share recent sales data with the appraiser, especially if you know the local market well.

3. Highlight upgrades and renovations:  Make a list of renovations and recent upgrades and provide it to the appraiser. 

4. Be present for the appraiser: If possible, be present during the appraisal to answer any questions and provide additional information about your home. 

A low appraisal can feel like a setback, but with the right approach, it doesn't have to derail your real estate transaction. By understanding the reasons behind low appraisals and knowing the steps to address them, you can navigate this challenge with confidence. Stay proactive, work closely with your real estate agent, and explore all your options to ensure the best possible outcome for your home sale or purchase. 

If you are looking to buy or sell contact Refined Realty! Our experienced real estate professionals are here to guide you through the process and help you achieve your real estate goals.