Unless you are one of the 23 percent of the population (as of January 2017) lucky enough to pay cash for a residential home, you are at the mercy of the lenders to appraise your next home at the value you need in order to obtain a mortgage.
A home appraisal is a process the lender takes to evaluate the property in terms of its replacement cost, marketability and physical condition to guarantee that, in the case that it has to be foreclosed, the lender may re-sell it quickly with a minimal loss.
The bad thing is, even when both sides agree on a price, the deal could fall apart thanks to an under-appraisal. So, what can you do if you find yourself in this scenario?
Appeal the appraisal
Appeal errors or bad comps to the appraiser. Read the entire appraisal report, cover to cover. Whether or not you find actual errors in the details about the home you’re buying or selling, check in with your agent about whether the comparable properties used by the appraiser were reasonable, especially if they are from a different neighborhood, school district, town or construction era than the home you’re trying to buy or you are aware that much more similar or nearby homes have been sold in recent times than the comparable properties you see in the appraisal.
Order a second appraisal
Yes, it’s ok to ask for a second opinion. The idea here is that if the second appraisal backs up your arguments, listing the correct property details or more accurate comparables, the lender is much more likely to exercise its discretion to deem the first one as inaccurate and go with the second opinion.
Low appraisals disappoint everyone around the negotiating table. And if you have an issue, it is likely that another buyer will have the same issue, so the seller might be better off renegotiating with you unless they have other offers.
Pay the difference or split the difference.
You can always consider your personal situation. There are so many factors that go into buying a home that you may be willing to pay the difference between a low appraisal and the purchase price. This is especially so when the gap is small and you have the cash, or when you know the seller is barely breaking even on the deal or has offered to split the difference with you.
Mortgage banks have more control when it comes to choosing appraisers than mortgage brokers do.
If all else fails, if you have an appraisal contingency in your contract, you can walk away, get your deposit back, and hope for better luck the next time around.
The Certo Team
55 N. Arizona Place Suite #103
Chandler, AZ 85225
Contact a licensed housing specialist now! 602-429-6789