Can a Low Home Appraisal Keep You From Buying a Home?
Your purchase offer for a home likely contains several contingency, including one that is based on the home appraisal. The results of the appraisal could have a bearing on whether or not your lender is willing to fund the purchase of the home. If you have an appraisal upcoming, here is what you need to know.
What Is the Home Appraisal?
The home appraisal is an estimate of what the home you want to buy is worth. An appraiser will consider several factors to determine the value of the home, including the number of bedrooms, location, and the value of comparable homes in the area.
Although you have to pay for the appraisal, you have no say in who the appraiser is. Your lender will select the appraiser and provide you a copy of the report.
When you receive the appraisal, it is up to you and your real estate agent to review it and determine if there is a need to take action.
What If the Appraisal Is Lower Than the Purchase Price?
If the appraisal is lower than the purchase price, there is a good chance that the lender will not agree to finance the home for the agreed upon amount. The lender needs to know that it is making a good investment and funding the purchase of a home that is worth less than the financed amount is not.
You have several options available to you. You can agree with the appraisal and look for another home to buy. However, if you want to move forward with the home, you can do so by paying the difference between the sale price and the appraisal.
You can also choose to renegotiate with the seller. If he or she is willing to lower the sale price of the home, your lender will finance the home.
In addition to these measures, you can challenge the appraisal. You can point out any inaccuracies or unfair comparisons in the appraisal. You can even ask the lender for a new appraisal with a different appraiser. You will have to pay for the new appraisal, but you might get the results that you want.
Before the appraisal, talk to your real estate agent about what he or she expects from the results. The lender could help prepare you for what steps you could possibly take next just in case the appraisal is not what you expect.