So you’re under contract to buy a home and the appraisal comes in low. What does that mean? Can you still proceed? Will the seller matched appraised value? Or are you stuck? I’m here to demystify what happens when an appraisal comes in low and what some of your options are.

Depending on how far apart the contract price and appraised value are, you might be able to meet in the middle or ask the seller to match appraised value, but they don’t have to. And if you are financing your purchase, you don’t have to pay more than appraised value either.

 

What are some other options if you really want the house but have fallen victim to a terrible appraisal?

1. Change lenders. You can change lenders and get another appraisal. Your current lender likely will not order another appraisal, so you’ll probably have to jump ship. When you switch lenders, a fresh appraisal will be ordered. Yes, you’ll have to start the process over, but it could be worth if if both buyer and seller still have the same goal in mind. One thing you’ll want to double check, are the contract time frames for getting your financing in order. Switching lenders might put you behind the ball a little bit, so an extension up front for getting your loan approved might be a good idea.

2. Change financing type. Are you getting FHA financing? If so, even switching lenders won’t help. FHA appraisals stick with the property for six months. The only hope to continue with your purchase would be switching to conventional financing or coming to an agreement with the seller.

3. Like I mentioned above, if options 1 or 2 don’t feel like real options to anyone involved, the parties will have to agree to a price reduction matching appraised value, paying above appraised value, meeting somewhere in the middle or walking away.

Hope this simplifies your options on what to do when a low appraisal comes in. Remember, an appraisal is only ONE person’s OPINION of value. Both the buyer and seller previously agreed on what their price opinions were. Keep that in mind when working toward a solution.