What Happens if the House You're Buying Does Not Appraise?

By
Real Estate Agent with Coldwell Banker, 170 N Main Street, New City NY 10956
http://actvra.in/NxM

What Happens if the House You're Buying Does Not Appraise?

If you are purchasing a home and financing it with a mortgage, the bank will require an appraisal of the property to determine its market value before committing to a mortgage.  They determine the dollar amount they are willing to lend you based on the appraised value of the house as opposed to the purchase price of the house.  Hopefully the two numbers will be one and the same. 

But, what happens if the house you're buying does not appraise, and the appraised value is less than the agreed upon purchase price?  You've got several options.

  • You can renegotiate the deal and try and get the seller to drop the price to the appraised value.  This is the best option.  It will allow the sale to home redgo thru as planned.  If the seller refuses to drop the price, he runs the risk of losing his buyer and in all probability the next buyer that comes along will have the same problem of the home not appraising.  No one wants to purchase a home at a higher than market value price.
  • The buyer can make up the difference between the appraised value and the agreed upon sale price by putting extra cash down.  Of coarse this is only an option if he has the cash and if he's willing to purchase a home at a higher than market value price.  If this is the house of his dreams, then it may just be the seller's lucky day!
  • The seller and the buyer split the difference and meet somewhere in middle.  The seller reduces the price somewhat and the buyer brings cash to the table. This is the most frequent solutions.
  • You can cancel the transaction.  If all else fails and your purchase offer was contingent on mortgage and appraisal, then you could walk away from the deal and still get your deposit money back.

If none of the above options work there still remains one other possibility.  The buyer can try to get the appraisal adjusted.  Appraisals are based on the choice of comparable sales within the past 60 days within a radius of a few miles, and within 10% variance in size.  If you know of any homes in the immediate area that are pending sales, similar in size and value, that the appraiser overlooked, you can offer it up for consideration.  It's worth a try!

Hopefully, you and your realtor have done your homework and your offer based on the current market stats will have no appraisal issues. But, not to worry if there are glitches; most can be remedied.

If you're looking for a home in Suffern NY or anywhere else in Rockland County, I'll be happy to be your guide and help you navigate through the home buying process and smooth the bumps along the way..

 Flickr photo by nikcname

Posted by

Lora "Leah" Stern - Your Rockland County, NY REALTOR of Choice - (914) 772-4528

Your Rockland County, NY Real Estate SpecialistLeah Stern Signature Photo

Lora "Leah" Stern
Real Estate Salesperson
Coldwell Banker Residential Brokerage
(914) 772-4528 CELL
(845) 634-0400 OFFICE
(862) 345-2463 FAX

If I can assist you in any way with your real estate needs in Suffern, NY Rockland County or the surrounding areas, please feel free to contact me by phone at (914) 772-4528, email me at Leah.Stern@cbmoves.com or visit my website .

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Re-Blogged 8 times:

Re-Blogged By Re-Blogged At
  1. Christine Smith 01/19/2011 02:01 PM
  2. Brandon & Grace Yee 01/19/2011 04:26 PM
  3. Cindy Jones 01/19/2011 06:53 PM
  4. Melissa McKinney 01/19/2011 09:47 PM
  5. Markita Woods NMLS#190699 01/20/2011 09:47 AM
  6. Kathleen Cooper 01/20/2011 10:35 AM
  7. Karen Bernetti 01/21/2011 09:06 PM
  8. Pam Dent 01/26/2011 07:23 AM
Topic:
Home Buying
Location:
New York
Groups:
Posts to Localism
Buyer Information - What Buyers Need to Know in Today's Market
Advice for Sellers
Advice for Buyers
1st Time Buyers
Tags:
appraisals
low appraisals
home does not appraise
suffern ny real estate

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Ambassador
1,591,479
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Leah, I have seen more deals FALL APART for low appraisal then the solutions that you offer that make more sense.

Jan 19, 2011 10:40 PM #48
Ambassador
915,966
Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

Great explanation for a question that comes up often in this market.

Jan 19, 2011 11:57 PM #49
Rainmaker
1,784,382
Dorie Dillard
Coldwell Banker United Realtors - Austin, TX
Realtor-Canyon Creek- NW, Austin TX Homes For Sale

Good morning Leah,

This is a great post..I missed it but caught it on Melissa's re-blog. Nice presentation of what happens when a house does not appraise!

Jan 20, 2011 07:24 AM #50
Rainmaker
131,744
Markita Woods NMLS#190699
WestStar Mortgage Inc NLMS#2925 - Woodbridge, VA
Queen of Mortgages - FHA, VA, Conventional, USDA

Thanks for sharing. I was just thinking of writing my own post about appraisals in Virginia. My latest client was able to get the appraisal adjusted...and move forward withthe transaction.

Also I am reblogging, thank you!

Jan 20, 2011 09:33 AM #51
Rainmaker
370,405
Lori Mode
Keller Williams Realty - Elk Grove, CA Homes for Sale - Elk Grove, CA
Mode and Durham, Your Elk Grove Real Estate team

Leah - Great post on a difficult subject happening all too often these days it seems.  I missed it when you wrote it, but picked it up a reblog also! 

Jan 20, 2011 10:41 AM #52
Rainmaker
495,638
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

Frank and Sharon - In general that's true here as well except there is no accounting for the buyers' emotional factor.

Gary - Working things out makes far more sense, especially so because there are lots fewer buyers than homes available for sale today.

Margaret - We get this one repeatedly.

Dorie - Thanks for stopping by.

Markita - Thanks for reblogging and glad you were able to work the deal thru successfully.

Lori - Looking forward to the day when this ceasing to be a front and center issue.

Jan 20, 2011 06:35 PM #53
Rainmaker
267,937
Carla Freund
Keller Williams Preferred Realty - Cary, NC
Raleigh - Cary Relocation & Luxury Home Specialist

Lora - Great post. so many sellers and buyers don't know what to do.

Jan 20, 2011 11:29 PM #54
Rainmaker
655,696
Barbara Altieri
RealtyQuest, Fairfield and New Haven County CT Real Estate - Shelton, CT
REALTOR-Fairfield County CT Homes/Condos For Sale

Leah -- Great post on all the possible solutions to the issue.  I had this happen last year.  The seller came down to the appraised price.  I do the same as Bill #8 -- "must appraise at or above contract price".

Jan 21, 2011 11:30 AM #55
Rainmaker
736,082
Debbie Walsh
Keller Williams Realty - Middletown, NY
Hudson Valley NY Real Estate 845.928.8000

And what color would that horse be exactly?  LOL

Jan 21, 2011 07:57 PM #56
Rainer
230,150
Karen Bernetti
Staging4Smooth Transitions Connecticut Home Staging - Southington, CT

What a great price Leah - I've re-blogged it!  Thanks so much!

Jan 21, 2011 09:08 PM #57
Rainmaker
599,136
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Lora - Great post and you outlined the option beautifully.  Furthermore, there is nothing wrong with appealing appraisals.  Since the inception of HVCC, I have had the misfortune of seeing some of the sloppiest and most inaccurate appraisals that I have ever seen in my entire mortgage career.  Subsequently, I have also appealed more appraisals since May 2009 than I ever did prior to that. 

While I haven't always been able to get the value that the transaction needed in order to proceed (buyers still canceled the transaction because seller refused to lower the price), I have always been able to get a higher value than what the appraiser origninally provided.  The reason for that was because I was always able to prove how incompetent incomplete and inaccurate the appraisals were.  Good grief, one moron appraiser had the wrong address!  SERIOUSLY!!!

Low appraisals have been the bain of my business ever since the inception of HVCC.  While sometimes the other parties have been able to come to terms with a low appraisal and have been able to proceed with the transaction and get to the COE, there have been so many others that ended right there with that low appraissal.

Jan 22, 2011 01:20 PM #58
Rainmaker
495,638
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

Carla - SO then this is a great starting point.

Barbara - Great tip for all of us to adopt.

Debbie - That would be green of coarse!

Karen - Flattered.  Thanks for the reblog.

Donna - Thanks for the view from the other side.  We tend to indirectly place blame on the poor appraisals on the banks and mortgage people, forgetting that you guys are just as much victims as we are.  Bottom line, is that before all else double check the appraisers info and comps, makeing sure he hasn't misrepresented the correct property in question.

Jan 23, 2011 11:33 AM #59
Ambassador
405,197
Pam Dent
Gayle Harvey Real Estate, Inc. - Charlottesville, VA
Realtor - Charlottesville Virginia Homes and Horse Farms

Good article.  This is a real problem in the current maket.  Even with a properly priced home I "sweat" the appraisal.  Having to appraise is another reason for a seller not to overprice the home.

Jan 26, 2011 07:19 AM #60
Rainmaker
495,638
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

Pam - It seems we all sweat the appraisal.

Jan 26, 2011 06:10 PM #61
Rainmaker
219,966
Jackie Hawley
ReMax Encore - Clarkston, MI
Southeast Michigan Real Estate

I just had an appraisal come in low on a sale and in speaking with the appraiser I learned that now days the lender is setting the parameters to a greater extent than in the past - how new the comps are, how far away, lender dictating that it's still a declining market and how much to depreciate, dictating what he can and can't adjust for, etc. I don't see appraisals as anything near fair market value anymore- it's a value set by comparable sales within a specific lender's guidelines. A different lender with different guidelines the same appraiser could come in with a different value.

Good post with excellent explanations- too often the first thought is to just kill the deal and move on.

Feb 10, 2011 10:42 AM #62
Anonymous
Dawn

I am aware that appraisals typically come in right around the purchase price (when worth it obviously). Well our appraisal was done & all looks great except for a huge error by the appraiser....he wrote down the wrong sale price ($4000 less that the actual one). The appraisal came back over the incorrect purchase price. He said he went back to the house and took pictures of updated electrical panel etc and corrected the purchase price and re-submitted a new appraisal. I am so upset that his error may cause us to lose our loan approval.

Any advice?? Everything has gone perfect up until this point:(

Dec 10, 2011 10:58 PM #63
Rainmaker
495,638
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

Dawn, I might be missing something here but if the appraisal came in higher than the incorrect purchase price what. is the problem?  The differential (if there still is one)would be less than the $4000 that represented the actual price.  I'd wait and see what the new appraisal yielded and then if there is a problem renegotiate.  Maybe you could get the seller to absorb the difference - since loosing this deal would set him back more than the differential of that small amount.

Dec 12, 2011 11:50 AM #64
Rainer
183,344
Dave Sullivan
www.TheCreditGuy.TV - Birmingham, MI
The Real Story on Your Credit Score - TheCreditGuy

Excellent information I will forward it if that is ok? thank you!!!

Nov 21, 2012 12:56 PM #65
Rainer
183,344
Dave Sullivan
www.TheCreditGuy.TV - Birmingham, MI
The Real Story on Your Credit Score - TheCreditGuy

Excellent information I will forward it if that is ok? thank you!!!

Nov 21, 2012 12:56 PM #66
Rainmaker
495,638
Lora "Leah" Stern 914-772-4528
Coldwell Banker, 170 N Main Street, New City NY 10956 - New City, NY
Real Estate Salesperson

Dave - Thanks and no problem; feel free to pass it on.

Nov 21, 2012 04:30 PM #67
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