Don’t let a low home appraisal disrupt your sale. You have options.

Despite rising interest rates shrinking your potential pool of buyers, now is still a great time to sell your home. Home prices continue to increase, just not as quickly as they did over the last couple of years. Still, keep in mind that rising home values can also present a challenge for sellers.

Most buyers in today’s market are financing their home purchases with a mortgage. To be approved for a loan, lenders require buyers to have an appraiser come out to the property. This is the bank’s way of verifying the home’s value so that they know it is secure to lend the buyer money. In a rising market, the appraised value of your home could come in lower than your asking price. This doesn’t happen very often—around 8% of the time, according to a 2018 Fannie Mae report—but if it happens to you, what can you do?

First, you can always appeal the appraisal. You could talk to the appraiser’s manager and make a formal appeal. However, this only works if the appraiser has botched up the numbers he relied on to do the valuation. That rarely happens.

If that’s not the issue, you can consult with your broker and try to analyze why it came in low. Markets do soften and inventory does increase. That drives prices down. Banks are worried and they’re turning loans down. They have raised interest rates and that’s resulted in lower values across the board. Find out why your broker thinks it’s low and act rationally.

“It won’t be as difficult as it was in the past to find a buyer willing to bridge the gap.”

Otherwise, you could ask your potential buyer to make up the difference. Many buyers don’t want to do this, but you have the upper hand in a seller’s market like the one we’re in now. Some may even agree to an appraisal gap guarantee, which ensures they’ll pay the difference if your appraisal is low.

If you’re motivated to sell your home, and getting more than your asking price isn’t your top priority, you could also simply lower your asking price to match the appraised value. That could entice your buyer to increase their earnest money deposit, depending on how you negotiate.

Finally, be aware that the Fannie Freddie database records low appraisals in a computer database for six months and it rats out on your house to any government mortgage underwriter for six months. If the FHA appraisal was low, you can’t just say we’ll just get a new appraisal with a new buyer next week. It won’t work if it’s stuck to your house for a while.

If you’ve thought about selling your home and would like to know what yours is worth, visit my website to use our online calculator. If you have any other questions about selling your home or the market in general, don’t hesitate to give me a call or send me an email. I’d love to speak with you.