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.
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.
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.
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.
If the buyer can't come up with more cash and the seller won't lower the price, the buyer may have no choice but to back out of the sale. If the purchase agreement doesn't contain an appraisal contingency, the buyer will lose their earnest money deposit and possibly even face legal action.
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.
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.
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.
A low appraisal could be very good for you as the home buyer — if the seller decides to lower the price to match the appraisal. However, you're taking a risk when the appraisal doesn't support the asking price. It could mean that the house is actually a lemon.
Property buyers get their earnest money back if the deal goes south for reasons covered in any outlined contingencies. Otherwise, there's little or no chance of a refund. If you change your mind late in the buying process for reasons other than contingencies, the seller can keep the earnest deposit.
“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.”
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.
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.
The seller often does not generally get a copy of the appraisal, but they can request one. The CRES Risk Management legal advice team noted that an appraisal is material to a transaction and like a property inspection report for a purchase, it needs to be provided to the seller, whether or not the sale closes.
Contingencies are conditions that must be met before a real estate agreement is legally binding. An appraisal contingency is a clause that allows home buyers to back out of an agreement if the appraisal value of the property is lower than the purchase price.
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.
You can dispute the appraisal by submitting a reconsideration of value (ROV). However, before doing this, you should thoroughly review your valuation with your real estate agent (who might also be a REALTOR®).
A low appraisal could derail a home sale or refinance. If the appraisal comes in lower than the sales price, the home buyer won't be able to borrow enough money to cover the price of the home. They'll either have to pay the difference out of pocket or renegotiate with the seller to drop the sales price.
Appraisals generally take 1 to 2 weeks, but can take as long as 4 weeks in a busy real estate market. The biggest reason for appraisal delays is lack of appraiser availability. The number of available appraisers is declining 3% each year.
Real estate appraisal fees are sometimes negotiable, so it's useful to consider this option. In some special cases, it may be appropriate to negotiate the appraisal fee. This usually occurs when you are buying a property located in a rural area, sometimes called a non-lender conversion property.
Telling an appraiser that you think the house is worth more can backfire. It may make the appraiser suspicious of your motives. Appraisers are trained professionals who use market data to determine a home's value. They don't base their assessment on what the homeowner thinks.
If you review the assessment objectively and feel it is off-base, write a rebuttal or provide comments on your performance appraisal. State clearly why you disagree with the evaluation. A rebuttal aims to add a permanent record to your current review.
Homeowners can also ask to accompany the appraiser during the inspection, although they should run that by the lender first, as the appraisal is done on behalf of the bank. Homeowners can appeal an appraisal, but before taking steps to do that they should find out if the buyer is willing to pay the higher price.