What If the Appraisal Doesn’t Match the Purchase Price?
Update: 2016-11-03
Description
If a home doesn’t appraise for its agreed-upon purchase price, there are a few alternate options both buyers and sellers can take to rectify the situation.
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If a home doesn’t appraise for the agreed-upon purchase price, what are some of the options that buyers and sellers have moving forward? Selling a home? Click here for a FREE Home Value Report
It depends on the purchase agreement. A lot of times, the language in a purchase agreement is going to say that the home has to appraise for at least the purchase price or the buyer won’t buy the home. If that language is taken out, a couple different things can happen.
The first is that if that buyer isn’t putting much money down, they can get turned down for the loan. If you are a buyer and you’re putting a substantial amount of money down and the appraisal comes in lower, the bank will probably not turn that situation down. You could be at risk of losing the earnest money, however, especially if the seller negotiated that they weren’t going to be contingent on any kind of an appraisal.
The key thing to remember is to have all your bases covered. There are situations where appraisers appraise a property, and if they pull comparable properties in an area where values are lower, they can be wrong. The comps that they pull and the values that they give are not always correct. If I’m representing the seller in those situations, I’m fully prepared with my own alternative value report to present to them.
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Have all your bases covered.
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In most cases like that, the buyer’s agent understands that we have a different opinion, and they’ll take that data back to their buyer. The buyer, too, usually does their own due diligence as far as researching prices on comparable properties. They may feel like, although the appraisal didn’t come in, the value of the home is still there and still worth purchasing.
I’ve also had situations where a buyer is buying a home and the appraisal comes in and the square footage is less. Fortunately, the language on most purchase agreements aren’t contingent on square footage. There are many other different variables that come into play. Square footage is important, but other things such as amenities and the condition of the home are key factors in terms of coming up with value.
For the most part, we don’t have these kinds of issues in our market. We’ve seen some good price appreciation over the last couple of years. I’ve been doing a lot of research on properties, and I feel like in a lot of situations we’ve topped out on price a little bit. It’s hard to say where things are going to go, but my guess is that we’re going to have more inventory and a higher number of days on the market. With that, you might see prices soften a bit, but we’re still in a strong seller’s market at the moment.
If you have any questions, please don’t hesitate to reach out to me. Just give me a call or send me an email, and I’d be happy to help you.
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