I know how nerve-wracking it can be to wait for an appraisal when you are selling your home. I also know that if your appraisal comes in low, it may feel like the end of a sale or a canceled deal, however, this is not the case. It may mean you have to renegotiate or change some things but I have a few tips that will help!
What is an Appraisal?
First things first, let’s talk about what an appraisal is. An appraisal is a professional report that helps gauge a home’s value. The most common time for an appraisal is when you are selling your home but a homeowner can request one at any time. If the person buying your home is financing the purchase, their lender orders an appraisal to ensure that the house is worth the amount the bank is agreeing to finance. An appraisal protects the buyer’s lender from offering too much money for a home that is not worth the cost.
Many times, there is a home appraisal contingency that states that if the appraisal comes back low, the buyer has the option to back out of the deal and get their earnest money back.
If the appraisal is greater than the offer, you are in the clear. If the appraisal is lower than the offer, buyers and sellers will have to come to a mutually beneficial solution.
What Can You Do as the Seller After You Receive a Low Appraisal?
- Ask for a copy of the appraisal.
- Offer the seller financing.
- Ask the buyer to challenge the appraisal.
- Renegotiate the sale price with the buyer.
- Cancel the sale and relist your home.
What Can You Do as the Buyer After a Low Appraisal Comes In?
- Make up the difference in cash.
- Shift some down payment to make up the difference.
- Appeal the appraisal.
- Cancel the contract.
What Home Appraisers Look for and How to Prevent a Low Appraisal
An appraiser is there to determine the condition of the home and its value. Here are a few things they are looking for when they come to the home:
- What is the age or condition of the home?
- What is the square footage?
- Are there upgrades or improvements?
- Are repairs needed?
- Is there up-to-date insulation, etc.?
- Are there energy-efficient windows or other construction details?
- What is the lot size?
- What is the location of the home including the school district, nearby amenities, etc.?
It is a good idea to prepare your home for an appraisal. If you have done any major improvements on your home or renovated, have the receipts ready to give to the appraiser. Make sure you have cleaned up. You have probably already done this before you listed your home but it is important that your house looks tidy and well-maintained. In addition to cleaning, make sure your smoke and carbon monoxide detectors are functioning.
I’m Here to Help
Whether you are looking to buy or sell a home, the appraisal is just one of the building blocks in a complicated but exciting process. One of the benefits of working with a real estate agent you can trust, is they will help you price your home appropriately which helps with the appraisal.