What Happens When a House Is Appraised for Less Than the Offer?

When Your Home’s Value Falls Below Offer

When you make an offer on a house, the hope is that the appraisal will come back at or above that number. However, sometimes the appraisal comes back lower than the offer. This can be a frustrating experience for buyers, who may have to renegotiate with the seller or even walk away from the deal altogether. In this blog post, we will explore what happens when a house is appraised for less than the offer.

There are a few potential outcomes when a house is appraised for less than the offer. The first is that the buyer and seller can renegotiate the price of the home. This can be a difficult conversation, as the seller may not want to lower the price of their home and the buyer may not have the extra money to make up the difference. If they are unable to come to an agreement, the second possibility is that the buyer could get financing for the difference between the offer and appraisal. This is known as a bridge loan, and it can be difficult to obtain. The third possibility is that the buyer could walk away from the deal altogether.

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Remember that an appraisal is just one person’s opinion on what a house is worth. So if you have your heart set on a particular property, it may be worth going ahead with the purchase even if the appraised value comes back lower than what you initially offered. It all comes down to what both the buyer and seller are willing to agree upon in the end.

Understanding the Appraisal Contingency

An appraisal contingency is a vital protection for buyers. This clause in your purchase agreement allows you to withdraw from the deal. You can do this without losing your earnest money deposit. This applies if the home appraises for less than the agreed-upon purchase price. It provides a crucial safety net. Always ensure your offer includes this contingency. Your real estate agent will guide you on its inclusion. Without it, you face greater financial risk or you could lose your deposit if you back out. This contingency protects your investment.

Negotiation Strategies for a Low Appraisal

When an appraisal comes in low, negotiation becomes key. Several strategies exist. First, you can ask the seller to lower the purchase price. This matches the appraised value. Present the appraisal report as evidence. Second, you might propose splitting the difference. You and the seller each contribute a portion to bridge the gap. Third, you can bring additional cash to the closing. This covers the difference between the appraisal and the offer. Finally, if all else fails, you can exercise your appraisal contingency. This allows you to walk away. Discuss these options with your agent. They help you determine the best path forward.

Conclusion

If you find yourself in this situation, it is important to consult with your real estate agent to see what the best course of action is. They will have experience with this type of situation and can help you navigate the negotiation process. Whatever you do, don’t let the appraisal derail your home buying journey. With a little patience and perseverance, you will find the perfect home for you and your family. [ 1 ]