An appraisal is a critical stage of a home sale process. A property's appraisal value helps the seller to confirm their house's value, the buyer to avoid overpayment, and the financier to safeguard their investment. Thus, many sellers feel discouraged when the appraisal gives a value lower than the agreed-upon price.
Below are tips for dealing with a low appraisal.
Understand the Appraisal
First, scrutinize the appraisal to understand why the appraiser reached their conclusion. Contact the buyer for a copy of the appraisal and study it. Common reasons for low appraisals include:
- Extreme upgrades and updates
- Rapidly changing property market
- Appraisal errors, such as missed or bad comparable sales
- Incorrect pricing
Work with your agent to understand the appraisal report.
Canvas for an Appeal or a New Appraisal
Request an appeal or a new appraisal if you believe the low appraisal is squarely due to the appraiser's mistakes. Maybe the appraiser is inexperienced, did not do their work properly (maybe they did a drive-by appraisal), or is unfamiliar with the neighborhood.
Only the lender can order a new appraisal, and only the buyer can request one. However, you can talk with the buyer and provide them with the evidence to request a new appraisal. For example, you may need to:
- Provide the relevant comps
- Provide missing information, such as permits for past renovations
- Point out significant omissions, such as valuable upgrades
Lenders are usually reluctant to order second appraisals, especially if the difference is insignificant. However, you lose nothing by requesting a second appraisal. The more evidence you can provide, the more likely you will succeed with the appeal.
Put the House Back Onto the Market
You don't need to sell the house to the current buyer. Put the house back into the market if the lender or buyer is not agreeable and you genuinely believe your house is worth more than the appraisal.
Fix the house as much as possible before putting it back on the market. Make useful improvements even if the first appraisal did not entirely focus on their lack. After that, don't hesitate to ask the price you want for the house. You have the right to market the house for what you think it's worth. Buyers also have the right to offers they believe are best for the house.
Involve a real estate agent in all stages of your home sale process. The agent will guide you and help you deal with complications, such as low appraisals.
For more information, contact a real estate agency, such as Idyllwild Properties.