Don’t let a low home appraisal disrupt your sale. You have options.
Despite rising interest rates shrinking your potential pool of buyers, now is still a great time to sell your home. Home prices continue to increase, just not as quickly as they did over the last couple of years. Still, keep in mind that rising home values can also present a challenge for sellers.
Most buyers in today’s market are financing their home purchases with a mortgage. To be approved for a loan, lenders require buyers to have an appraiser come out to the property. This is the bank’s way of verifying the home’s value so that they know it is secure to lend the buyer money. In a rising market, the appraised value of your home could come in lower than your asking price. This doesn’t happen very often—around 8% of the time, according to a 2018 Fannie Mae report—but if it happens to you, what can you do?
First, confer with your real estate agent to make sure your home isn’t overpriced for the market. If it is, you’ll need to adjust your price to align with the current market conditions since most buyers won’t want to shell out thousands of dollars to cover the difference between the appraised value and the asking price.
"It won’t be as difficult as it was in the past to find a buyer willing to bridge the gap."
If that’s not the issue, look over the comparable sales in your area. The appraiser already bases their value on comparable home sales nearby, but you might be able to find better comps to justify your asking price.
Otherwise, you could ask your potential buyer to make up the difference. Many buyers don’t want to do this, but you have the upper hand in a seller’s market like the one we’re in now. Some may even agree to an appraisal gap guarantee, which ensures they’ll pay the difference if your appraisal is low.
If you’re motivated to sell your home, and getting more than your asking price isn’t your top priority, you could also simply lower your asking price to match the appraised value. That could entice your buyer to increase their earnest money deposit, depending on how you negotiate.
Finally, if you and your buyer can’t come to an agreement on how to proceed, they could cancel their contract and walk away. That would allow you to go back to square one and order a new appraisal altogether.
If you’ve thought about selling your home and would like to know what yours is worth, visit my website to use our online calculator. If you have any other questions about selling your home or the market in general, don’t hesitate to give me a call or send me an email. I’d love to speak with you.