Why Didn't The Appraisal Meet The Sales Price?

Getting a bad appraisal hurts. When an appraisal comes in below the agreed sales price, it can throw an entire contract right out the window. It doesn't necessarily have to happen that way, but it is a distinct possibility. First, let's look at the "WHY" when it comes to an appraisal. A low appraisal means one of two things:

1. Your house isn't worth the contract price due to other recent sales in your area that were lower than yours.
2. The appraiser made a mistake.

You can always request a review of the appraisal if you think the appraiser made a mistake, but you (or your agent) are going to need to back that claim up with proof, i.e. other recent sales that the appraiser may have missed or omitted and the reason why you think there was an error. Hopefully the appraiser can justify changing the appraised value and the sale can continue on as normal. If not, then there are still options:

1. The seller can agree with the buyer to lower the sales price to the appraised value
2. The seller can ask the buyer to pay the difference, but understand they cannot finance that overage and would need to pay the difference in cash
3. The seller and the buyer can release the contract, and try and sell the house to someone else.

None of these options are ideal, unfortunately. If you lower the sales price, that means the seller is going to make less money from the transaction, possibly thousands less. If you ask the buyer to pay the difference, they are not obligated to say yes, and they may choose to walk away from the contract and find another home. If you do end up releasing the contract, the seller may run into another problem with the appraisal. Some types of appraisals are actually attached to your house, possibly for as long as 6 months! If the seller tries to sell it to someone else, their appraiser may be able to see the old appraisal, preventing them from writing one which is higher (and more favorable to the seller). This could make all of the seller's work trying to sell the house to someone else a worthless endeavor, so make sure you check that before cutting a contract loose.