What Happens if the Property Im Buying Doesnt Appraise?

What Happens if the Property Im Buying Doesnt Appraise?

You found your dream house and maybe bid a little more than you intended to pay. You figure it will all work out since your mortgage pre-approval was for more than you bid. But then the appraisal happens and you hear the dreaded words the house didnt appraise.

Now what?

What Does it Mean for a Property Not to Appraise?

First, lets look at what it means when a house doesnt appraise. Dont sellers market their homes for the right price?

In a perfect world, yes they do, but not all sellers work with experienced real estate agents or appraisers. They may price the home on what they feel its worth, but the market data may say otherwise.

A homes true market value relies on the appraisers evaluation of the subject home and any comparable sales in the area. An appraisers fair market value is an independent evaluation of the property that most lenders take at face value.

What Options do you Have if a Property Doesnt Appraise?

So what happens if the appraiser says the home is worth less than you offered? Its a difficult situation, but you have options.

• Renegotiate the sales price with the seller Many sellers will renegotiate the sales price knowing that unless they find a cash buyer, they wont get the higher price since lenders wont lend more than the home is worth.

• Pay the difference in cash If you have the cash handy, you can make up the difference between the sales price and appraised value. This means youll pay more for the house than its worth, but sometimes if its a long-term investment, its worth it.

• Walk away from the sale If you dont have the cash to make up the difference and the seller wont renegotiate, you may want to consider finding another property thats worth as much as you offered.

Should you Buy a Hosue that Doesnt Appraise?

The bigger question here is should you buy a house that doesnt appraise? While its a personal decision, you should weigh all the factors.

Ask yourself:

• How long will you keep the home? Paying more for a home youll only own for a short time will likely end up with a loss.
• Do you plan to fix the home up to increase its value?
• Do you have the cash to invest in a home that youre paying an inflated price for?
• Will your lender approve it?

Final Thoughts

When a house doesnt appraise it can feel frustrating, but there are ways to work around it. If youre wondering how youd handle the situation or you want a trustworthy real estate agent by your side helping you make these difficult decisions, contact me.

Ive been in the industry for many years and have helped families through similar situations. While its not fun to find out a home didnt appraise, you have options and Im here to help you through them.