1. Rising values (appraisers are slow to recognize the value increases)
2. Bidding wars. With little inventory many houses have multiple bids and often times sell above sales price.
When an appraisal comes in low there are things you can do to move forward.
Here are some examples:
1. Seller/Listing agent can dispute the appraisal. This is typically done by providing comparables that have sold in the last 6 months that the appraiser may have missed. Banks will also review the appraisal to make sure the appraiser did a good overall job.
2. Some banks will allow a 2nd appraisal if the underwriter feels the value assigned by the appraiser is questionable. The 2nd appraisal can be a good measuring stick to see where value is/should be.
3. Buyer can pay cash for the difference. If the house appraises for $100K for example…and is selling for $105K…the seller can pay the $5K in cash to cover the spread. This would be in addition to any down payment requirements. So if the buyer was putting 5% down they would now be required to put 5% down + the $5K cash difference in value and sales price.
4. Buyer and seller can renegotiate the contract and either lower the sales price or drop it to some amicable middle ground.
As always talk to your lender and don’t be shy if you ever have ANY questions.
Max A Kallos
Recognized in ‘Atlanta’ Magazine as a Five Star Mortgage Professional
Endorsed by Emmy Winning Consumer Advocate Dale Cardwell!