2. When recently surveyed, over
a third of Realtors reported
having had one or more home
sale contracts fall apart this past
year. Autopsies of these dead
deals often surface a truly lethal
culprit: appraisals that come in
below the agreed-upon purchase price.
3. 1. Appeal errors or bad comps to the appraiser.
Read the entire appraisal report, cover to cover. See
if you spot any errors it’s not at all unheard of for an
appraisal report to miss a bedroom or underreport
the home’s square footage. The trouble is that what
starts out as a clerical error can often result in the
application of the wrong “comparables” when it
comes time for the appraiser to pick the properties
to use as benchmarks of your home’s fair market
value.
4. 2. Ask for a second opinion. Particularly in cases of
error or bad comps, if the appraiser ignores your
request to revise the report, you might need to
escalate your request to the lender itself. Here’s
where it’s important to be working with an expert
agent and mortgage pro with a great reputation; if
they believe strongly in your case, they may be able
to plead it to the underwriter and request that a
second appraisal be done. The idea here is that if
the second appraisal backs up your
arguments, listing the correct property details or
more accurate comparables, the lender is much
more likely to exercise its discretion to deem the
first one a dud and go with the second opinion.
5. 3.Renegotiate.Low appraisals disappoint everyone
around the negotiating table. If the sellers have the
leeway (read: equity), they might agree to bring the
price down to the appraised value or near enough
that the buyer feels comfortable putting some extra
cash into the deal to close the purchase price-to-
appraised price gap. Some buyers refuse to ever do
this on general principal, as they feel like it’s
overpaying for the property. Others realize that
appraisals may come in low for reasons less
indicative of the property’s value, like a lack of
comparable sales in the area, and figure that to get
the home they want, they’re willing to kick in a little
extra dough.
6. 4. Pay the difference or split the difference. On the
flip side of renegotiating is reconsidering your
personal position. If you’ve been house hunting for
two years, forgoing low rates and the tax and
lifestyle advantages of owning your home, and
you’ve finally found ‘the one’ in great
condition, perfect location you might think long and
hard about whether you are willing to pay the
difference between a low appraisal and the
purchase price. This is especially so when the gap is
small and you have the cash, or when you know the
seller is barely breaking even on the deal or has
offered to split the difference with you.
7. 5. Change lenders. Mortgage banks have more
control when it comes to choosing appraisers than
mortgage brokers do. (Fortunately, many
experienced local mortgage brokers work for
companies that also have banking divisions, and
may be able to process your loan through that
division in an effort to get your transaction a fresh
start and work around a low appraisal. Ask your
mortgage broker if their office has a banking
division, if you’re not sure.)
8. Realtors: What are some other low-appraisal
workarounds that have worked for you and your
clients? How do you help buyers and sellers
decide what moves to make when the appraisal
comes in low?
9. Randy Bett
Investment Realtor/Author/Investor
Real Estate Professionals Inc.
Better Group Real Estate
202-5403 Crowchild Trail NW
Calgary, AB T3B 4Z1
Phone:403-774-7464 Ext:1
Fax:403-208-0082
Toll Free fax:888-711-6801
