A low appraisal on a home you want to buy can lead to your lender refusing to loan you the amount needed to purchase the home. If this happens, you might have to give up on purchasing the home. If your home was appraised for a lower value, here is what you need to know.
Why Was the Home's Appraisal Low?
There are many reasons that a home appraisal is lower than expected. For instance, it is possible that the appraiser did not properly investigate the value of other homes in the neighborhood. Appraisers often factor in homes of comparable values in the neighborhood to determine a home's worth.
What the appraiser usually does not factor in is why homes in the neighborhood might have sold for a lower price. Without fully researching the reasoning for low sales, the appraiser could be unfairly undervaluing the home you want to buy.
The amenities or features in the home can also be a reason that an appraiser gives a lower than expected valuation of a home. Attractive and high-end features in the home do not necessarily translate to a high appraisal value. If other homes in the neighborhood have the same features, but they are valued lower, your dream home's value can be affected.
Since there are many other factors that could have influenced the appraiser's valuation, you should closely review the report with your real estate lawyer. He or she can help you pinpoint what led to the low appraisal.
What Can You Do?
Once you have reviewed the appraisal, there are a few available options for challenging the valuation. Start by looking at the homes that the appraiser used for his or her comparables. If the appraiser did not factor in all aspects of the home, including its age and proximity to schools, then you can use this to challenge the appraisal.
You can put together a list of other homes in the immediate and surrounding area that are more on scale with the home you want to buy. Provide that list to the appraiser and ask for a new assessment.
Another option is to attempt to negotiate with the seller. If your real estate lawyer (such as one from Schulze Howard & Cox) can convince the seller to sell for the appraised value, you can still purchase the home. At a minimum, the seller might be willing to split the difference between the appraisal value and the sale price.
If the seller refuses to accept the lower value, your attorney can send a demand letter to the lender and ask for a second appraiser to assess the property.