Having your home appraise for less than the price that the buyer and seller have agreed on can be incredibly frustrating. After all, if the seller and buyer have agreed to a price, why should the appraisal throw a monkey wrench in the works?
It is disappointing – but not really a bad thing – to get a low appraisal. On one hand, it means that your agent did such a great job selling your place that someone overpaid for it (and their agent let them do it). On the other hand, you’re under contract for a price that they the appraiser says is too high. The price needs to be lowered.
The first thing to remember here is that the person with the money controls the deal. In most cases, the bank has the money that is being used to purchase the house, with the promise from the buyer to pay them back someday. So the bank – via their appraiser – will call the shots.
If the appraiser says the home’s value is less than the contract price, there are a few scenarios that can play out:
Scenario 1: The buyer will request the seller to lower the price to the appraised value, the seller agrees, and they go to closing at a lower amount.
Scenario 2: The buyer will request the seller to lower the price to the appraised value. The seller does not agree. This leaves the buyer with the option to
Stand by demand to lower price, or
Bring cash to closing to cover the difference.
Scenario 3: In the event that the buyer needs the price lowered and the seller is unable or unwilling to lower the price, then the seller can unilaterally decide to void the contract.
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