How should you handle an appraisal shortfall?

In a market like this, homes don’t appraise for the sale price. In other words, appraisal shortfalls occur, and there are a number of ways to handle them.

1. Refute the appraisal. I’ve made a whole video dedicated to refuting appraisals, which you can watch here. In short, to refute an appraisal, you select comparable homes that have sold in your area to share with the appraiser to help them change their opinion of your home’s value. This doesn’t work very often, so if it doesn’t, it’s up to the buyer and seller to make things work.

2. Lower the sale price to the appraised value. For example, if the home sold for $200,000 and it appraised for $190,000, the seller could simply lower the sale price to $190,000. However this has to be evaluated in the context of the market; if the seller thought they could get another offer without lowering the price, why would they lower it? The seller might also meet the buyer in the middle without fully reducing the sale price.

“You can refute the appraisal, but the appraiser doesn’t change their findings very often.”

3. The buyer makes up the difference. If the seller elects not to do anything, the buyer will have to make up the entire difference. In this case, the seller needs to scrutinize that contract before accepting it to see how much of a down payment there is. The higher the down payment, the more likely the buyer is able to make up the difference.

4. Have the buyer go to another lender. If the buyer is sure that the house is worth $200,000 and the buyer’s agent is sure that they can get an appraisal for that amount, it might be better to find a new lender with a fresh set of eyes who is more likely to appraise it for the higher amount.

If you’d like to learn more about our market, feel free to give me a call. I’d be happy to speak with you anytime.