What Happens if the House You're Buying Does Not Appraise?

If you are purchasing a home and financing it with a mortgage, the bank will require an appraisal of the property to determine its market value before committing to a mortgage.  They determine the dollar amount they are willing to lend you based on the appraised value of the house as opposed to the purchase price of the house.  Hopefully the two numbers will be one and the same. 

But, what happens if the house you're buying does not appraise, and the appraised value is less than the agreed upon purchase price?  You've got several options.

  • You can renegotiate the deal and try and get the seller to drop the price to the appraised value.  This is the best option.  It will allow the sale to home redgo thru as planned.  If the seller refuses to drop the price, he runs the risk of losing his buyer and in all probability the next buyer that comes along will have the same problem of the home not appraising.  No one wants to purchase a home at a higher than market value price.
  • The buyer can make up the difference between the appraised value and the agreed upon sale price by putting extra cash down.  Of coarse this is only an option if he has the cash and if he's willing to purchase a home at a higher than market value price.  If this is the house of his dreams, then it may just be the seller's lucky day!
  • The seller and the buyer split the difference and meet somewhere in middle.  The seller reduces the price somewhat and the buyer brings cash to the table. This is the most frequent solutions.

  • You can cancel the transaction.  If all else fails and your purchase offer was contingent on mortgage and appraisal, then you could walk away from the deal and still get your deposit money back.

If none of the above options work there still remains one other possibility.  The buyer can try to get the appraisal adjusted.  Appraisals are based on the choice of comparable sales within the past 60 days within a radius of a few miles, and within 10% variance in size.  If you know of any homes in the immediate area that are pending sales, similar in size and value, that the appraiser overlooked, you can offer it up for consideration.  It's worth a try!

Hopefully, you and your realtor have done your homework and your offer based on the current market stats will have no appraisal issues. But, not to worry if there are glitches; most can be remedied.

If you're looking for a home in Suffern NY or anywhere else in Rockland County, I'll be happy to be your guide and help you navigate through the home buying process and smooth the bumps along the way..

 Flickr photo by nikcname

Lora "Leah" Stern - Your Rockland County, NY REALTOR of Choice - (914) 772-4528

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If I can assist you in any way with your real estate needs in Suffern, NY Rockland County or the surrounding areas, please feel free to contact me by phone at (914) 772-4528, email me at Leah.Stern@cbmoves.com or visit my website .

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This post has been included in New York Real Estate News
Post is included in group: 1st Time Buyers
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Post is included in group: Buyer Information - What Buyers Need to Know in Today's Market
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66 Comments on What Happens if the House You're Buying Does Not Appraise?

20 Most Recent Comments Displayed Show All

JAN
19
2011
1,330,854 Points 189 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Leah, I have seen more deals FALL APART for low appraisal then the solutions that you offer that make more sense.
10:40pm • #48
824,224 Points 155 Featured Posts Localism Sponsor Outside Blog Hit Router Attended Rain Camp Called Shot Master

Great explanation for a question that comes up often in this market.
11:57pm • #49
JAN
20
2011
1,227,421 Points 79 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Good morning Leah,

This is a great post..I missed it but caught it on Melissa's re-blog. Nice presentation of what happens when a house does not appraise!
7:24am • #50
120,836 Points 9 Featured Posts Outside Blog Attended Rain Camp

Thanks for sharing. I was just thinking of writing my own post about appraisals in Virginia. My latest client was able to get the appraisal adjusted...and move forward withthe transaction.

Also I am reblogging, thank you!
9:33am • #51
306,375 Points 3 Featured Posts Outside Blog Hit Router Called Shot Master

Leah - Great post on a difficult subject happening all too often these days it seems.  I missed it when you wrote it, but picked it up a reblog also! 
10:41am • #52
445,536 Points 11 Featured Posts Attended Rain Camp Called Shot Master

Frank and Sharon - In general that's true here as well except there is no accounting for the buyers' emotional factor.

Gary - Working things out makes far more sense, especially so because there are lots fewer buyers than homes available for sale today.

Margaret - We get this one repeatedly.

Dorie - Thanks for stopping by.

Markita - Thanks for reblogging and glad you were able to work the deal thru successfully.

Lori - Looking forward to the day when this ceasing to be a front and center issue.
6:35pm • #53
179,782 Points 1 Featured Post Outside Blog Called Shot Master

Lora - Great post. so many sellers and buyers don't know what to do.
11:29pm • #54
JAN
21
2011
478,758 Points 15 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

Leah -- Great post on all the possible solutions to the issue.  I had this happen last year.  The seller came down to the appraised price.  I do the same as Bill #8 -- "must appraise at or above contract price".
11:30am • #55
626,453 Points 11 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

And what color would that horse be exactly?  LOL
7:57pm • #56
219,526 Points 27 Featured Posts Called Shot Master

What a great price Leah - I've re-blogged it!  Thanks so much!
9:08pm • #57
JAN
22
2011
596,136 Points 70 Featured Posts Outside Blog Called Shot Master

Lora - Great post and you outlined the option beautifully.  Furthermore, there is nothing wrong with appealing appraisals.  Since the inception of HVCC, I have had the misfortune of seeing some of the sloppiest and most inaccurate appraisals that I have ever seen in my entire mortgage career.  Subsequently, I have also appealed more appraisals since May 2009 than I ever did prior to that. 

While I haven't always been able to get the value that the transaction needed in order to proceed (buyers still canceled the transaction because seller refused to lower the price), I have always been able to get a higher value than what the appraiser origninally provided.  The reason for that was because I was always able to prove how incompetent incomplete and inaccurate the appraisals were.  Good grief, one moron appraiser had the wrong address!  SERIOUSLY!!!

Low appraisals have been the bain of my business ever since the inception of HVCC.  While sometimes the other parties have been able to come to terms with a low appraisal and have been able to proceed with the transaction and get to the COE, there have been so many others that ended right there with that low appraissal.
1:20pm • #58
JAN
23
2011
445,536 Points 11 Featured Posts Attended Rain Camp Called Shot Master

Carla - SO then this is a great starting point.

Barbara - Great tip for all of us to adopt.

Debbie - That would be green of coarse!

Karen - Flattered.  Thanks for the reblog.

Donna - Thanks for the view from the other side.  We tend to indirectly place blame on the poor appraisals on the banks and mortgage people, forgetting that you guys are just as much victims as we are.  Bottom line, is that before all else double check the appraisers info and comps, makeing sure he hasn't misrepresented the correct property in question.
11:33am • #59
JAN
26
2011
374,842 Points 2 Featured Posts Localism Sponsor Outside Blog

Good article.  This is a real problem in the current maket.  Even with a properly priced home I "sweat" the appraisal.  Having to appraise is another reason for a seller not to overprice the home.
7:19am • #60
445,536 Points 11 Featured Posts Attended Rain Camp Called Shot Master

Pam - It seems we all sweat the appraisal.
6:10pm • #61
FEB
10
2011
193,614 Points 3 Featured Posts

I just had an appraisal come in low on a sale and in speaking with the appraiser I learned that now days the lender is setting the parameters to a greater extent than in the past - how new the comps are, how far away, lender dictating that it's still a declining market and how much to depreciate, dictating what he can and can't adjust for, etc. I don't see appraisals as anything near fair market value anymore- it's a value set by comparable sales within a specific lender's guidelines. A different lender with different guidelines the same appraiser could come in with a different value.

Good post with excellent explanations- too often the first thought is to just kill the deal and move on.
10:42am • #62
DEC
10
2011

I am aware that appraisals typically come in right around the purchase price (when worth it obviously). Well our appraisal was done & all looks great except for a huge error by the appraiser....he wrote down the wrong sale price ($4000 less that the actual one). The appraisal came back over the incorrect purchase price. He said he went back to the house and took pictures of updated electrical panel etc and corrected the purchase price and re-submitted a new appraisal. I am so upset that his error may cause us to lose our loan approval.

Any advice?? Everything has gone perfect up until this point:(
Dawn
10:58pm • #63
DEC
12
2011
445,536 Points 11 Featured Posts Attended Rain Camp Called Shot Master

Dawn, I might be missing something here but if the appraisal came in higher than the incorrect purchase price what. is the problem?  The differential (if there still is one)would be less than the $4000 that represented the actual price.  I'd wait and see what the new appraisal yielded and then if there is a problem renegotiate.  Maybe you could get the seller to absorb the difference - since loosing this deal would set him back more than the differential of that small amount.
11:50am • #64
NOV
21
118,480 Points

Excellent information I will forward it if that is ok? thank you!!!
12:56pm • #65
118,480 Points

Excellent information I will forward it if that is ok? thank you!!!
12:56pm • #66
445,536 Points 11 Featured Posts Attended Rain Camp Called Shot Master

Dave - Thanks and no problem; feel free to pass it on.
4:30pm • #67

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Lora "Leah" Stern, Rockland County NY Real Estate 914-772-4528

Suffern, NY

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