You looked at dozens of houses and finally found the home of your dreams. You made an offer and it was accepted and the appraisal was ordered. Fantastic! Or not… the home doesn’t appraise for your offered amount. Now what?
Some reasons it doesn’t appraise enough
This happens a lot. If the markets are rising appraisals and comparable sales don’t keep pace which can mean lower appraisals affect sales.
Sometimes it’s the fact that distressed sales, meaning foreclosure sales and short sales, skew the appraisal. That affects the ability of buyers to get a mortgage for the home.
Generally lenders will only lend funds up to a certain percentage of the appraised value of the home. Typically this is 80% of appraised value or loan to value as they call it.
If your appraisal is too low you can do a few things
One is to walk away. Why start out with a home with a negative equity value?
Two, you can go back to the sellers and renegotiate the sales price. More likely than not there will be a contingency clause in your contract that will allow that.
Third, you can ask for a second appraisal. It’s possible that the first appraiser’s estimate wasn’t accurate. It may mean asking for a value appeal where the original appraiser reconsiders, or asking your lender if they would accept a second appraisal.
The last thing you can do is just come to the table with more money to make up the difference.
That brings up a few questions
First, do you have it? Remember the mortgage lender is going to ask you for proof of where the extra funds came from which could also affect getting your mortgage.
Another question you should ask is would you pay more for a car, dress or couch than its worth? Then why would you buy a home for more than it’s worth? Think it through, talk with your Realtor and make the best decision for you.
Sometimes it is worth bringing a bit of money to the table to get your dream home and sometimes it just isn’t the best solution. Only you can make that call!