What Do You Do If The Appraisal Is Low?

What Do You Do If The Appraisal Is Low?

I had a client call the other day, after the sale was negotiated, before the appraiser had been to the house. These were first time buyers, for the most part very nervous as the details of the transaction flow chart moved along.

First, the decision of which house to buy was difficult. I think these young professionals were testing their engagement promises for the first time. Once they had their goals in sync, finding the right house became easier. There were three offers on the property and they really didn't go above the asking price, but they had the best credentials. Still, they worried that they paid too much.

Next there were some worries about a few details of the inspection. Do you ask the Seller and risk losing the house if they won't do the minor repairs? What kind of a job will they do?

Once the offer was negotiated, they were worried about loosing the earnest money. "Not going to happen unless you no longer want to buy the house," I told them. "Oh, We do. We do," they said.

A few days later the phone rang again. "What happens if the house doesn't appraise? We were looking on Zillow and it will probably come in low."  "Well," I told them. "That's not something to worry about until it happens."  I went on to explain that there is wording the contract that says, for one thing, you don't have to buy it if the appraisal is low, but you can still buy it if you can come up with the difference, or you can negotiate with the seller for a price adjustment. Hardly anything bad can happen for the buyer if the appraisal comes in low. And this house has a large groomed yard and a new kitchen and new windows all around.

A quick check of the neighborhood solds presented a picture of fixer homes that had sold recently. Zillow has a hard time knowing much about the windows, kitchens and quality of the landscaping, as they never go to the locations. I predicted the appraisal would come in at value, and it actually was $5,000 over the contracted price. Nothing but blue skies up above.

 For some reason, this young couple was not worried at all as they signed documents. And since closing they've called twice with thanks for the help they received with purchasing this great home.