Before a lender will approve the loan on a home purchase for the buyer, there must be an appraisal conducted on the property.

A home appraisal is a stressful part of the property for both the home buyer and the seller.

If any appraisals are disapproved, the sale is in jeopardy.

Most likely both parties want the lender to approve the loan, but there certainly can be more upside for the buyer in this situation [especially if the buyer has extra cash in their pocket].

Let’s dig into detail more about the appraisal in this article; and what can happen if it comes below the agreed-upon asking price!


What is a home appraisal?

What is a home appraisal

A home appraisal is a process in which a professional appraiser evaluates the value of a property.

This can be useful in a variety of situations, such as when a homeowner is selling their property, when a mortgage lender is considering a mortgage application, or when a property owner is trying to determine how much their home is worth.

What does the home appraiser do?

During a home appraisal, the appraiser will typically visit the property and examine various factors that can affect its value.

This may include the size and layout of the home, the condition of the property, the quality of the materials used in its construction, the age of the home, and any special features or amenities that it has.

The appraiser will also look at comparable properties in the area to help determine the value of the subject property.

Once the appraiser has gathered all of the necessary information, they will use it to create a report that estimates the value of the property.

This report, known as an appraisal report, will typically include a detailed description of the property, photographs of the interior and exterior, and a summary of the appraiser’s findings.

The report will also include an estimated value for the property, which is known as the appraised value. This will be sent to the mortgage lender.

What happens if the value comes under the agreed-upon sale price

Home Value

If the appraisal on a house comes in under the asking price, it can be a difficult situation for both the seller and the buyer.

The seller may feel like they are losing money, while the buyer may feel like they are overpaying for the property.

In this situation, there are a few options that the seller can consider.

  • One option for the seller is to order another appraisal. This can be a good idea if the first appraisal was done by an inexperienced or biased appraiser. Keep in mind the seller may be responsible for ordering and paying for the second appraisal.

A second appraisal may come back with a higher value, which could help to bridge the gap between the asking price and the appraised value.

  • Another option for the seller is to lower the sales price of the property to match the appraised value. This can be a difficult decision, as it may mean that the seller will receive less money for the property than they had originally hoped.
  • A third option would be for the buyer to come out of pocket with cash and would pay the difference between the purchase price and the value of the appraisal. This amount would be in addition to the buyer’s down payment.

However, it can also help to move the sale along more quickly, as the buyer will be more likely to move forward with the purchase if the price is more in line with the appraised value.

  • In some cases, the sale can be canceled if the appraisal comes in significantly under the asking price.  In this situation, the buyer will have their earnest money returned to them unless an appraisal waiver was included.

Many buyers in the height of the hot housing market were including appraisal waivers as part of their paperwork. This is also known as an appraisal contingency.

What is a waiver

An appraisal contingency waiver is a document that allows a borrower to waive their right to have a professional appraisal performed on a property when they are seeking a mortgage loan.

Some sellers required the contingency that a buyer was going to put down a contract on homes at the height of the housing boom when there were bidding wars!

In some cases, a mortgage lender may offer an appraisal waiver as an option to the borrower, particularly if the property is in a location where home values are stable and there is a low risk of significant changes in value.

What if the sale is canceled

Home Seller

If the sale is canceled then the seller has really three options.

  1. Relist the property on the local MLS and look for another buyer, maybe an all cash buyer.
  2. Take the home off the market and wait a month. Maybe more sales in the near future will help justify the higher price tag.
  3. The seller may just decide to take the home off the market permanently.

The Appraisal protects the buyer, seller, and lender

It’s important to keep in mind that the appraisal process is meant to protect both the buyer and the seller. The appraised value of a property is an unbiased estimate of its worth, which can help both parties to make informed decisions about the sale.

While it can be frustrating if the appraisal comes in lower than the asking price, it’s important to remember that it’s just one factor to consider in the overall process of buying or selling a home.

Final Thoughts on the Process

In conclusion, if the appraisal on a house comes in under the asking price, the seller has a few options to consider.

These may include ordering another appraisal, lowering the asking price, or potentially canceling the sale if a contract has not yet been signed.

Ultimately, the best course of action will depend on the specific circumstances of the sale, and it may be helpful for the seller to consult with a real estate agent or attorney for guidance.

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Arnab Das is a passionate blogger who loves to write on different niches like technologies, dating, finance, fashion, travel, and much more.

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