I wanted to talk today about low appraisals, what they mean, and how you should handle them.
With our market being as strong as it is, we sometimes see appraisals come in low. Since our market is strong, we have certain price points that have houses that receive multiple offers when they go on the market. This drives up the cost of those houses.
If the appraisal comes in low, there are four options you have to facilitate the deal:
1. Cancel the deal. Most of the time appraisals come back during your due diligence period, which means you can cancel the deal if the appraisal is shockingly low.
2. Put up more cash. If there were multiple offers on a property and the appraisal comes in $5,000 lower than the sale price and you absolutely still want this home, you can pay the difference in cash if the seller isn’t willing to lower the price.
3. Ask the seller to lower the price. Many times this is what happens in our market - the seller lowers the price because they know that if you don’t buy the house, the next buyer will likely have the same issue of a low appraisal. Similarly, you can change the terms of your loan. For example, maybe you can do a first and second mortgage with your lender, which could offset the difference.
4. Challenge the appraisal. We do this all the time. If the appraisal comes in low, we send it back to the appraiser and request that they look at comparable properties that they may have missed when assigning a value to the property. We’ve done this three times in the last month and got the deal done the way we wanted!
We will see a bit of softening in our market, but it is still a tremendous time to buy or sell. If you have any questions about buying or selling a home in the Raleigh area, give us a call or send us an email. We’d love to help you out.