Standard for handling appraisals lower than contracted sales price
Member since 2024 · 158 posts · 88 votes
Hello,
I am selling a property and it has appraised lower than the contacted price by $9,000. In this case the buyer is asking for the seller to concede the difference between the sales price and the appraisal price. Is this standard? Can the seller avoid this buy putting in the contract that the buyer agrees to pay the difference? Any other ways to handle this?
You can lower the price.
The buyer can pay the extra $9k in cash, if they have it.
The buyer can walk away with their earnest money and you can lower the price $9k for the next buyer or require them to bring $9k in cash.
TBH $9k is almost nothing unless this is $100k property. The last property I bought was listed for $325k. I offered $320k and we went in to escrow. The appraisal came back at $285k. I offered to bring an extra $5k to the table to help the seller out ($290k). But she had to drop the price $30k of the $35k shortage.
You can lower the price.
The buyer can pay the extra $9k in cash, if they have it.
The buyer can walk away with their earnest money and you can lower the price $9k for the next buyer or require them to bring $9k in cash.
TBH $9k is almost nothing unless this is $100k property. The last property I bought was listed for $325k. I offered $320k and we went in to escrow. The appraisal came back at $285k. I offered to bring an extra $5k to the table to help the seller out ($290k). But she had to drop the price $30k of the $35k shortage.
What Bill said and:
First thing to do is to evaluate the appraised value. Do you think it is a reasonable and reliable appraisal. If not, do you have actual factual data to use for an appeal. In other words, did the appraiser not include any relevant comparables and/or data/facts, that would be better support for the Subject in the market. Unfortunately, If there are no other verifiable facts to support a better value, than it is usually futile to appeal based on opinion and/or interpretable characteristics alone (i.e. the Subject is in superior condition to this comp and therefore, it should be valued higher, etc.). But, it is possible the appraiser missed some better data.
What Bill said and:
First thing to do is to evaluate the appraised value. Do you think it is a reasonable and reliable appraisal. If not, do you have actual factual data to use for an appeal. In other words, did the appraiser not include any relevant comparables and/or data/facts, that would be better support for the Subject in the market. Unfortunately, If there are no other verifiable facts to support a better value, than it is usually futile to appeal based on opinion and/or interpretable characteristics alone (i.e. the Subject is in superior condition to this comp and therefore, it should be valued higher, etc.). But, it is possible the appraiser missed some better data.
Thanks for the reply. In this case the house was priced comparable to others in the neighborhood within the last 3 months, however the appraiser used comps outside the neighborhood. We did provide comps from the neighborhood, but they refused to correct the appraisal.
Did you have multiple offers, or was this your only offer?
You can try and negotiate somewhere in between the $9,000 difference and have the buyers come up with extra cash at closing to make up for it- but chances are they are gonna want it at appraised value; especially if they're the only offer. This is also gonna depend on how strong the buyer is financially if its even possible for them to pay the difference.
If you get multiple offers on a sale in the future and the price goes over asking, make sure the offer includes some type of language waiving a portion or all of the appraisal gap.
If you tried to fight the appraisal already and didn't get anywhere, you don't really have much recourse. It's not typical the appraiser will admit they are wrong and bring it up. Also, is it even worth the headache?
Are you working with an agent?
In the future if you're representing yourself in the sale; meet the appraiser at the property and give him the comps you came up with to justify the price. highlight any inferiorities to your property on the comps so they can see.
If you're working with an agent and they're not doing this: drop them immediately. It's not enough to just show up to the appraisal as an agent. They should do everything they can to make the home appraise! Some agents don't even show up they have the appraiser use the E-KEY.
If you have any questions reach out, I'm happy to help!
Thanks for this info. We ended up lowering the price to the appraised value and basically splitting the difference. I was working with an agent and unfortunately a lesson learned for me. She did not come for the appraisal or the inspection. The buyer actually bid $5K above my sale price and my agent made it sound like she let them know that if it didn't appraise they would need to make up the difference, but it was clear she did not set that expectation because they came back to negotiate it. I will definitely make sure that the language is included in the contract going forward. I would not have accepted the offer if I had known they would not cover it.
Thanks for this info. We ended up lowering the price to the appraised value and basically splitting the difference. I was working with an agent and unfortunately a lesson learned for me. She did not come for the appraisal or the inspection. The buyer actually bid $5K above my sale price and my agent made it sound like she let them know that if it didn't appraise they would need to make up the difference, but it was clear she did not set that expectation because they came back to negotiate it. I will definitely make sure that the language is included in the contract going forward. I would not have accepted the offer if I had known they would not cover it.
The listing agent doesn't show up to the inspection, that's the buyers agents job to go with their buyers.
However, appraisal is a must for the listing agent. They should be bending over backwards to make sure they represent your best interests and get you the best deal. Unfortunately, it seems like you had a lazy/inexperienced listing agent. How naive of them to take a buyers word for it. For next time, you know what to look for in an agent now!
The next time you're hiring an agent, you can always send me a message and I will give you some tips on what to look for when choosing one.
Thank you, appreciate it! This was my first house sale, so I probably should have asked for the advice earlier :)