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What to Do If Your Home Doesn’t Appraise for the Sales Price

If you’re like most home sellers, you’ll probably do some negotiating to arrive at a final sales price for your property. Depending on the market in your neighborhood, you might need to come down a bit from your asking price to get a deal done, or you might entertain multiple offers that could include prices above what you’re asking.

Hopefully, negotiating a sales price agreeable to all parties can be achieved quickly and painlessly. Sometimes, especially in super-competitive markets, negotiations can become drawn out and even a bit heated. Especially in the case of the latter, it can be frustrating when you finally arrive at a price, and then the house doesn’t appraise for that amount.

When an appraisal comes in lower than expected, it can feel downright devastating for a home seller, but there are some options for when it occurs. Here’s what you can do if your home doesn’t appraise for the sales price.

Drop Your Price

If the agreed-upon purchase price in your sales contract exceeds the appraisal amount, the simplest way to push the deal through is to drop the contract’s purchase price to match the appraisal. There are some potential complications to this approach. Also, depending on your local market conditions, dropping your price is quite possibly your last resort options. (See below for the best option – cash is king! Take a cash offer.)

If you had multiple offers on the home and simply chose the one with the highest sales price, the appeal of that particular offer can become moot if the appraisal doesn’t support that price. If there was another offer at or below the appraised value of the home but attractive in another way (a flexible closing date or money toward your closing costs) you might be willing to revisit it. Whether or not you’re able to do that might depend on if there was an appraisal contingency in the purchase contract and what provisions that contingency gives the seller.

Your real estate agent should be able to advise you on what steps you can take if you want to back out of a deal with an appraisal contingency, but if you’re serious about backing out of a purchase contract over a contingency that’s mostly meant to protect buyers and mortgage lenders, it might be time to get a legal expert’s opinion.

Get Another Appraisal

The appraised value of your home is the opinion of a certified appraiser, and, as everyone knows, different people can have different opinions. Theoretically, a different appraiser may have a different idea of the value of your home.

In practice, things rarely work that way when it comes to a home sale. Lenders are set in their ways, and the appraiser they used is very likely someone they trust. You could spend hundreds of dollars to “appeal” by getting another appraisal, but, in most cases, the buyer’s lender will still base their decision on the first appraisal.

Mortgage lenders make their decisions based on risk, and the lowest appraised value represents a lower risk.

Ask the Buyer to Make Concessions

If your home appraises below the contract price, you might be able to ask the buyer to make concessions. They could, for example, come up with the cash to make up the difference between the price and what their lender is willing to loan. Except in the most drastic conditions of a true seller’s market, this is a difficult request.

Once a home appraises below the sales price, the leverage is mostly with the buyer. But in a market where there is extreme competition among buyers for a limited amount of homes, a buyer might be willing to make concessions in order to secure the purchase. If that’s the case, the seller might ask the buyer to pay some of their closing costs or waive contingencies such as a home inspection.

Accept a Cash Offer

Accepting a cash offer will allow you to avoid this problem altogether. In crazier markets like we’ve been experiencing recently, cash offers have become more commonplace than ever, as it allows the buyer’s offer to be more appealing to a seller presented with a table full of generous offers to review. A cash offer cuts out time and red tape, and it allows you to avoid this issue of what to do if your home doesn’t appraise.

The Bottom Line

When a home is under contract but appraises for less than the agreed-upon purchase price, the buyer usually has an advantage in renegotiating. But a seller in that situation has a few options that might be worth considering.

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