Discover effective strategies and insights to tackle a low appraisal.
In this NWO real estate update, we’ll address a common concern among home buyers: dealing with a low appraisal. While it can be disheartening, understanding your options and maintaining the right perspective is crucial in navigating this situation. Here are a few things you need to consider if you run into this situation:
1. Recognize the impact as a buyer. It’s important to acknowledge that the implications of a low appraisal differ significantly depending on whether you’re the buyer or the seller. In this discussion, we focus solely on the buyer’s perspective, disregarding any potential impact on the seller.
2. Understanding ownership of the appraisal. As the buyer, it’s essential to remember that you paid for the appraisal, making it your property. You have the right to keep it without sharing it if you choose to do so. Furthermore, if the appraised value falls significantly below the contract price, you have the option to walk away, as stipulated in our standard A.R. offer form. However, it’s crucial to consider the emotional and financial investment you’ve already made in the process.
3. Viewing appraisals as an art. Appraising homes is not an exact science but rather an art form. Each appraiser may produce a different evaluation of the same property, emphasizing its uniqueness. Even in subdivisions with similar models and floor plans, every house possesses its own distinct characteristics. Therefore, a low appraisal should be regarded as a single event and not an irrevocable judgment on the property’s value.
“Understanding your options and maintaining the right perspective is crucial.”
4. Evaluating your best interest. As the buyer, it’s essential to assess whether paying the contract price aligns with your best interests. If you can comfortably bring additional funds to cover the shortfall, proceeding with the purchase might still be an option. However, if you have doubts or uncertainties, it’s crucial not to feel pressured or guilty about not pursuing the deal. Remember, there will always be other houses available.
5. Negotiating with the seller. In some cases, you can request the seller to bridge the appraisal gap by reducing the contract price to match the appraised value. Depending on the market, location, and price range, sellers might be willing to accommodate this adjustment to avoid the complications of renegotiating with new buyers. This approach can be effective, especially when emotions run high on both sides.
6. Weighing the risks of overpaying. If you find yourself in a multi-offer bid situation, consider the long-term implications of being the cash cow. While you may love the house and be willing to pay the difference, it’s essential to weigh the potential consequences. Overpaying at closing may not guarantee future profits when reselling the property. Seek guidance, reflect, and carefully consider all aspects before making a significant financial decision.
Call or email us if you have any questions about this topic. We’d love to hear from you!
