When you’re purchasing or refinancing a home, one of the most critical components of the process is the property appraisal. It determines the value of the home and is taken into account by lenders when approving mortgages, which is why receiving a low appraisal can be disheartening. However, it’s not the end of the world.
Here are a few tips on how to handle a low appraisal:
1. Review the appraisal report
The first thing you should do when you receive a low appraisal is to review the report carefully. Look for errors or inaccuracies in the report. Make sure that the appraiser has taken into account all the features and upgrades in the house. The appraisal report should include photos of the home, a description of its condition, and comparable properties that the appraiser used to determine the value.
If there are any mistakes or omissions in the report, contact your lender or the appraisal company to dispute them or ask for an amendment.
2. Get another opinion
If you feel that the appraiser has undervalued your property, consider getting another opinion. Hire a different appraiser to assess your home’s worth. Make sure to choose an appraiser who has experience in your local market and is licensed to operate in your state.
You can also ask your realtor to provide you with a comparative market analysis (CMA) to determine the current market value of similar homes in your area, which can help you dispute the appraisal with the lender.
3. Negotiate with the lender
If you’re still struggling with the low appraisal, try to negotiate with your lender. Explain why you think the appraisal is not accurate, and provide evidence to support your argument. You can also ask for a second appraisal at the lender’s expense to support your claim.
Keep in mind that lenders are unlikely to lend more money than the appraised value. However, you may be able to negotiate a lower down payment or lower interest rate to make up for the difference between the appraised value and the sale price.
4. Consider your options
If you can’t resolve the appraisal issue through negotiation or dispute, you have a few options. You can choose to pay the difference between the appraised value and your desired sale price, which may not be feasible for everyone.
You could also walk away from the sale if the appraisal comes in so low that you can’t afford the property or if the seller is unwilling to negotiate. If you’re just refinancing, you could choose to look for another lender who may offer a higher appraisal value.
In conclusion, a low appraisal can be frustrating, but it’s important to remain calm and evaluate your options. Ensure that the appraisal report is accurate, obtain another opinion if necessary, negotiate with your lender, and weigh your options before making a final decision.