I absolutely love Chris Ann's post about low appraisals. With the market increasing by leaps and bounds, it can be difficult to justify paying a higher price.... unless you've lost out on several homes to higher bidders!
The old adage is that a home is worth what someone is willing to pay for it. But, appraisers are often tied to what someone has already paid for it.
Read on and take heed!
Do Sellers Have to Lower The Sales Price if the Appraisal is Low?
The quick answer to this question is no. It is an option if the buyers have an appraisl contingency in the cntract. And certainly an option that the buyers in a transaction tend to prefer. However, the sellers do not always have to lower their sales price if the appraisal comes in low.
If the sellers choose not to lower their sales price, the buyer has the option to make up the difference and bring additional money in the form of a larger down payment. Why would a buyer want to do that?
Well, if a buyer has lost multiple properties in a seller's market (meaning there's little inventory to choose from) and the appraisal isn't that far off, it may very well be worth coming up with the money. Of course, the argument against this is that the buying is overpaying for the house. They will immediately be underwater if they pay even $1,000 more for the home.
Not true. As soon as that home goes to settlement at the sales price, it is a comp for the neighborhood, bringing values up.
Seller's markets are tough ones for buyers, and low appraisals are no exceptions. Before you walk from a home due to a slightly low appraisal, consider your options carefully. In a seller's market, prices are rising and you are just going to be back out in the crowd house hunting again. Perhaps a few thousand isn't a big deal if you can afford it. Especially if you love the home.
Chris Ann Cleland, Associate Broker- Licensed in Virginia, GRI, SFR, Northern Virginia Short Sale Specialist. Affiliated with Long & Foster, 7526 Limestone Drive, Gainesville, VA 20155. To contact Chris Ann, call 703-402-0037 or email chrisann@LNF.com. Or you can visit her website: www.nvarealestate.net.
Header photos taken by Chris Ann Cleland.
The opinions expressed in this post are those of Chris Ann Cleland, not those of Long & Foster REALTORS®.