If you're wondering how often home appraisals come in lower than a home's asking price, you'll likely be happy to find out that it's fairly rare. On average, only 10% of home appraisals fetch a lower number than the asking price.
A sales contract with a kick-out clause allows you to continue marketing and showing the property. If by the kick-out clause date you find another buyer willing to pay the sales price despite the lower appraised value, you can 'kick out' the original buyer and accept the new offer.
Do sellers usually lower their asking price if the appraised value is lower? Whether the seller decides to lower their asking price will depend on a number of factors, including how motivated they are to sell or if they have other offers above asking price.
There's often an addendum that allows buyers to back out without losing their earnest money deposit if the appraisal doesn't match the offer price. If the sellers stand firm and don't want to budge on price, the deal might fall through, sending the buyers back on their search for the perfect home.
The seller is bound by the contract.
Just because the appraisal shows the seller may have underpriced their property, they don't have the right to walk away from the deal.
If you receive a down valuation, there are a number of things that you can do: Negotiate with the seller. If you are happy to go ahead with the purchase irrespective of the surveyor's suggested price, you may be able to negotiate with the seller to reduce the price of the property. Challenge the valuation.
3. Ask The Seller To Lower The Price. Although the seller may have accepted an offer, as a buyer, you can ask the seller to lower the asking price to something closer to the appraised value.
Real estate experts estimate between 10-20% of appraisals come in lower than the sale price. But in today's competitive housing market, more homes are selling with multiple offers and the chances of an appraisal gap is increasing. When there is an appraisal gap you have five options. Renegotiate the deal.
Most appraisals come in at the right price. According to a report by Corporate Settlement Solutions (CSS), only about 8% of properties sold in the first half of 2024 sold for more than their appraised values.
If you walk away from a sale due to an appraisal gap, do you lose your earnest money? You will unless your purchase agreement included an appraisal contingency.
If you have an appraisal contingency in your contract, you can back out of an offer if it comes in lower than the sell price. You can because that means the bank won't give you as much money for the mortgage. The bank only covers what it appraises for.
“It has nothing to do with the seller; it is ordered by your lender, and payment is due regardless of the outcome,” says Maria Jeantet, a real estate agent with Coldwell Banker C&C Properties in Redding, CA. “It is typically paid by the buyer unless specifically negotiated ahead of time to be paid by the seller.”
Consumers have the option of filing a complaint regarding their appraisal or evaluation directly with their lender, or through the lender's federal regulator. Visit HelpWithMyBank.gov for more information about how to contact your lender's regulator and how to file an appraisal complaint.
If the appraisal value is lower than the expected sale price, one avenue is renegotiation. Both buyer and seller can come together to discuss a price adjustment that reflects the appraised value.
MARKET CONDITIONS
When markets move faster than normal, appraisal values lag market prices. As mentioned, the appraisal process compares recent past sales. Backward looking data -- no matter how recent it is -- won't keep pace with present prices in high-velocity markets.
If the seller won't negotiate a lower price, you'll be on the hook to pay the difference unless you have an appraisal contingency in your contract.
If your appraised value is lower than the agreed upon sales price, you'll have to make up the difference in cash, or cancel the deal.
Can a home seller change the price after a contract is signed? No. Typically, when a seller wants to back out of a contract, it's because the house appraised much higher than the offer and the seller wants a do-over. Unfortunately, at that point, you'd be legally obligated to go through with the under-contract buyer.
An aggressive offer is more than the price. A good buyer's agent will know how to sell your aggressive offer. More importantly make sure you chose an agent who will aggressively sell you as the best buyer in any market or price range.
If you've made an offer on a home and your lender's appraisal values the property at less than you've bid, the lender won't approve the full mortgage amount even if you qualify for it. In order for the purchase to go through, you may need to supply extra cash.
A low offer may be upsetting to the sellers, but if you and your real estate agent present the offer along with an expression of your appreciation for the property, it's more likely to be accepted than a low offer accompanied by a half-complete contract or an insult about the property's condition.
Yes, it's possible to sell a house for less than its market value. Homeowners often choose this approach due to specific financial needs, personal obligations, or home or market conditions that limit higher offers.
A mortgage valuation occurs after you've agreed on a price with the seller and the property is off the market. It happens post-mortgage application but before the lender issues a mortgage offer.