A new issue that we deal with currently with home sales is the appraisal. What happens when the house doesn’t appraise for the contract price? Appraisals are so tricky right now though with some neighborhoods not having as many comparable sales readily available. There is a lot of margin for subjectivity, and often, appraisers just have to do the best that they can on valuing a property.
A couple of options are available.
A buyer COULD come up with the difference with cash between the appraised value of the home and the contract price. More often than not, though, unless it is just a hot, undervalued property, this does not happen. Typically what happens is that the seller renegotiates the contract and oftentimes comes down to the appraised value, if the appraisal is clear and reasonable. The end of that sentence is of utmost importance though, “IF THE APPRAISAL IS CLEAR AND REASONABLE.”
Also we have seen the lender can ask for a review on the appraisal. However, the appraiser does not have the change their valuation and sometimes in unwilling to consider the review if he feels confident in the value given. If the lender decides to order a second appraisal, there has to be good justification to their underwriters on the need for the second appraisal.
So when a house doesn’t appraise, the bottom line is that the seller doesn’t have to sell, and the buyer doesn’t have to buy. Typically, though, an agreement is still met.