- Lenders require an appraisal on most financed purchases.
- Appraisers use recent comparable sales.
- A low appraisal doesn't automatically end a deal.
- Options include renegotiating, the buyer covering the gap, or challenging the appraisal.
How an appraisal works
A licensed appraiser visits the home and compares it to recent nearby sales, adjusting for size, condition and features. The lender uses that value to decide how much it will lend.
If it comes in low
- Renegotiate the price to the appraised value, or meet in the middle
- The buyer covers some or all of the difference in cash
- Ask for a reconsideration of value with better comparable sales
- End the deal, if the contract's appraisal contingency allows it
For sellers
Pricing your home in line with recent sales from the start is the best way to avoid appraisal trouble later. When an appraisal does come in low, having good comparable sales ready helps.
For buyers
Know ahead of time how much of a gap, if any, you'd be willing and able to cover. It makes the decision much easier if it happens.
Common questions
What happens if the appraisal is lower than the offer?
The buyer and seller can renegotiate, the buyer can cover the gap, the appraisal can be challenged with better comparable sales, or the deal may end under the appraisal contingency.
Can an appraisal be challenged?
Yes. You can ask the lender for a reconsideration of value, usually with comparable sales the appraiser may have missed.
Do cash buyers need an appraisal?
Not by a lender, since there's no loan. Some cash buyers still get one for peace of mind.
Whichever side you're on, I'd like to be the one who helps you do it right. Sellers start with a Game Plan built from the real sales around their home. Buyers start with a Buyer Game Plan.
