In selling a house, things don’t always go as planned or as hoped. Sometimes, just when everything looks to be working out, the deal falls through. Maybe you’ve received a good offer, the buyer is serious, you’re ready to move forward – and then your house appraises to low. It can and does happen But then what do you do? Here are 5 things to do if your Richmond house appraises low.
1. Understand Why Your House Appraises Low
The first thing you should do if your Richmond house appraises low is to find out and understand why it appraised low. That way, you’ll know how to proceed and what to do next.
The most common reasons for low appraisals are:
Although this isn’t a common occurrence, it does happen. “An inexperienced appraiser who doesn’t understand local influences on value can .. . be the culprit. The appraiser might have overlooked pending sale data, which could reflect higher comparable sales when closed, or they might have selected comparable sales from the wrong neighborhoods.”
VARIOUS MARKET FACTORS
There are also various market factors that can contribute to a low appraisal. For example, prices may have been artificially inflated owing to multiple offers. Or maybe a larger inventory of homes and fewer buyers have caused a decline in market values and, as a result, your lower-than-expected appraisal.
Some common additional factors include the following:
- You simply overpriced your home.
- “The underwriter might have made an incorrect evaluation.”
- There weren’t enough comparable sales in the area for an accurate valuation.
2. Lower Your Price
When you’ve determined why your Richmondhouse appraises low, you then have several options before you. The first and easiest of these is to simply lower your price. You may not want to do this, but it may be the best solution if one or the other of a couple of situations obtain: 1) your home was overpriced or 2) the value was inflated for the reason we mentioned above.
But, industry pros advise, you need to tread carefully here, “There’s no guarantee that the seller won’t receive a low appraisal from the second buyer’s lender as well if the first buyer walks away. This isn’t even to mention the time and trouble it takes to sell the property again. Sometimes a bird in the hand is best.”
To make sure you’re on the right track and to avoid a costly mistake, consult your local agent. Discover more by calling 8043878734.
3. Arrange for the Difference to Be Made Up in Cash
Another thing you can do if your Richmond house appraises low is to arrange for the difference between your asking price and the appraised value to be made up in cash. Typically, lenders are fine with this because it won’t affect the loan-to-value ratio.
This arrangement will allow you to get your asking price even though the buyer’s lender won’t lend the full asking price. “A low appraisal doesn’t mean the lender won’t lend. It just means that it will make a loan based on the ratio agreed to in the contract at the appraisal value.”
4. Dispute the Appraisal(s)
Another course you can take your Richmond house appraises low is to dispute the appraisal and/or order a second appraisal. To dispute the appraisal, you’ll need to request a copy of the appraisal from the buyer and then contact the lender to find out about and dispute the appraisal procedure.
In disputing the appraisal, you will need to ask “the agents involved to put together a list of recent comparable sales that justify the agreed-upon sale price, then submit that list to the underwriter and ask for a review of the appraisal. Try to use comps closer to the subject property than the comps that were used by the appraiser.”
If you and your agent think a second appraisal will result in a higher valuation, then that probably what you should do. Here’s what the experts say about this case: “Only the lender can insist upon a second appraisal, and typically only the buyer can make a request for another, which might or might not be honored. You can offer to split the cost of the second appraisal if you’re the seller.”
5. Cancel The Transaction
A final option you have when your Richmond house appraises low is just to cancel the transaction altogether. Very often, the purchase contract contains a financing contingency to cover just such a situation – typically in the case of the buyer not being able to get financing or a low appraisal. So, as the seller, you’ll be able to get out of the contract but will have to return the buyer’s earnest money.
Canceling the transaction is not as bad an option as it may sound because under different conditions you may be able to sell for more than the low appraisal seems to indicate. If you put your house back on the market and get an offer, the new appraisal may be much different than the old, low one.
The key, though, to avoiding these less-than-optimal solutions is to make sure you have an experienced local real estate agent in your corner. A good agent can perform a comparative market analysis to determine fair market value and help you price appropriately.
Don’t be in that unenviable situation when your Richmond house appraises low. Let our agents help you price accurately and according to fair market value. Find out more by sending us a message or calling 8043878734.