Understanding Home Appraisals: What Happens if the Value Comes in Low

A home appraisal is an unbiased, professional evaluation of a property’s value, typically ordered by a lender during the buying process. It is NOT an inspection. To understand the difference between appraisals and inspections, Click Here. In an appraisal, the appraiser examines the home’s size, condition, location, and comparable sales in the area to determine a fair market value. This figure helps the lender ensure that the loan amount is appropriate for the property.

But what happens if the appraisal comes in below the agreed-upon purchase price? This scenario, known as a low appraisal, can complicate a real estate transaction. Lenders usually won’t approve a mortgage for more than the appraised value, which can leave buyers needing to cover the difference out-of-pocket, renegotiate the price, or, in some cases, walk away from the deal.

Several strategies exist when facing a low appraisal. Sellers may agree to lower the sale price to match the appraisal, helping the transaction proceed smoothly. Buyers can also consider making up the difference with a larger down payment if financially feasible. Another option is to challenge the appraisal by providing additional comps or evidence of the home’s value, though success is not guaranteed.

In some situations, buyers and sellers negotiate alternative solutions, such as splitting the difference or including certain repairs or upgrades to justify the value. Communication and flexibility are key during this process, and having an experienced real estate agent can make a significant difference in navigating these discussions.

Understanding the appraisal process and knowing your options in the event of a low appraisal is crucial. It ensures that both buyers and sellers can make informed decisions and avoid last-minute surprises at closing.

Bottom Line:
A home appraisal protects both buyers and lenders by confirming the property’s value. If it comes in below the agreed price, options include renegotiating, increasing the down payment, or challenging the appraisal, with guidance from an experienced agent to keep the sale on track.

Navigating an appraisal can be tricky. Work with a knowledgeable Central Florida agent who can help interpret the appraisal, negotiate solutions, and guide you through a smooth closing process.