The hangover from the real estate market nonsense of the last couple of years continues. Everyone needs to reacclimate themselves with accurate pricing, contingencies, contract language and the many steps of getting a deal closed. One of the most challenging parts will be appraisals and knowing what happens if the appraisal comes in low.
Lenders continue to issue bulletins to appraisers reminding them that the best comps are the most current. In other words, use closed sales that reflect the changing market. Underwriting is also closely evaluating the market conditions form, appraisers are expected to accurately reflect the market, not simply rubber stamp things.
What happens if the appraisal comes in low is directly controlled by the parties involved in the contract. Solutions range from the adjusting contract price to appraisal, negotiating the difference, or the buyer terminating the contract. Every situation is different, resolution depends on the agents and parties working things out.
As a point of clarity, appraisals don’t “come in low”; they come in below contract price. Appraisers do not rubber stamp contracts, they follow MANDATED guidelines. Agents would be well advised to understand these guidelines, the selection of comparable sales at a bare minimum. They would also do well to ensure that their clients, buyers and sellers, understand this process. Most important, buyers and sellers should QUALIFY THEIR AGENT.