Understanding Real Estate

The Home Didn't Appraise for as Much as the Offer—What Options Are Available?

When you put in an offer on a home, your real estate agent will check the comps and the area to determine what the estimated value of a home is worth. However, if a home is unique or has had a lot of work done to it, there may not be comps in the area to compare it with. This can make it hard to determine the value of the property.

If you have put in an offer on a home, and the appraisal did not come back as high as your offer did, your home loan may only cover the appraised value. This may leave you wondering what other options you have. Here are a few of the options you have available if the home you are looking to buy didn't appraise as high as the offer you made.

Renegotiate the Purchase Price

If an appraisal comes back lower, you always have the option of using this as a negotiation chip. In many markets, buyers take out home loans to pay for the home purchase. Lenders will not provide you, or any other buyer, with a home loan for more than the home appraises for. Because of this, many sellers know that it will be hard to get a different buyer to buy their home at the higher price due to the appraisal as well, so they will often negotiate and help you get into the house at or near the appraised price. 

Pay the Difference With Cash

If you love the property and feel it is worth exactly what you offered on the home, another option available to you is paying the difference between what the home loan pays for and what you offered in cash. Not everyone has this option available to them. But if you do and you love the home, it may be worth it to you. 

Go Back to the Appraiser With New Information

Appraisers are human and they can make mistakes. They may input the square footage wrong or list the incorrect building materials. Your realtor agent or the buyer's agent can always go back to the appraiser with new information. The appraiser may then issue a new report with a new value. 

Walk Away

The last option you have if a home does not appraise for as much as you were hoping after putting in a bid is to walk away. When you put in an offer, most offers contain language that allows you to walk away penalty-free if the appraisal does not come in high enough. A great real estate agent will ensure this information is in there so there are no penalties to you if this happens. 

It can be stressful for both the buyer and seller if a home does not appraise for the amount they were hoping for. When this happens, you have the option of renegotiating the purchase price, paying the difference between what the home loan will cover and what your offer was in cash, providing the appraiser with new information to hopefully change their mind or walking away and finding a home that appraisers at its value.