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.
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.
Why would the buyers agent support the price with the comps, that's the listing agents job. If the appraisal comes in low, that's generally better for the buyer, as in most cases they'll get a better deal with a price drop to meet the appraised value.
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.
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 biggest appraisal gap occurred in April 2022, when 20% of homes appraised for less than their sales price.
An in-person appraisal can also slow down a home sale, especially if an appraiser determines that a home is worth less than the amount a buyer has agreed to pay for it. For these reasons, some buyers ask for an appraisal waiver, which would allow them to purchase a home without a formal appraisal.
You can ask the sellers to lower the purchase price to meet the appraised value or ask for other seller concessions to make up the gap. Request a new appraisal: You can dispute the appraisal and request a new one by submitting a reconsideration of value document in writing.
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.
Renegotiate With the Seller
Alternatively, you might consider including an appraisal gap clause in your offer. This clause specifies the maximum amount you're willing to pay above the appraised value. If the gap exceeds this amount, you can renegotiate or walk away from the deal.
Can the seller back out of a high appraisal sale? Can the seller back out if your appraisal is high? Realistically, the answer is “no.” For one, they accepted your offer and would be breaching the sales contract if they wanted to put the house back on the market to capture a higher price.
Ask for a reconsideration of value if you think the appraiser made a mistake. Consider filing a fair housing complaint if you suspect you've been discriminated against.
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.
Appraisal is lower than the offer: If the home appraises for less than the agreed-upon sale price, the lender won't approve the loan. In this situation, buyers and sellers need to come to a mutually beneficial solution that will hold the deal together — more on that later.
If the appraisal comes back low, it can delay or hinder your ability to move forward with the transaction. This is because mortgage lenders won't lend more money than the appraised value, forcing the buyer to take action of some kind.
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.
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.
In a sellers market, it's not uncommon for homes to sell above their listing price or even their appraised value.
According to CoreLogic data, approximately 8% of home appraisals come in below the contract price, though this percentage can shift with changing market conditions.
Poorly maintained homes or foreclosures have been known to drag property values down significantly. Their negative impact on appearances and security concerns will be taken into account when assessing area desirability levels.
The appraiser's primary role is to determine the fair market value of the property based on objective factors such as its condition, location, comparable sales, and market trends. The appraised opinion of value may be the same or very close to the contract price however, it may also be considerably higher or lower.
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.