Unless your buyers have a wad of cash or Bitcoin millions buying a home with a mortgage is the way to finance their transaction. That requires an appraisal to determine the value of the property. The appraisal is the instrument that sets the value of the property for the lender. The lender wants to know that the property’s value is higher than the value of the loan.
In a scenario where the house value is lower than the sale price, a sale can fall through. What can you do? #entarlovesyou
Imagine a bidding war in a tight market. Demand can drive up prices above the appraised value. If you are the seller, multiple offers are good news. It means getting more than your original asking price. The buyer is betting on winning the property by offering more mullah.
Until your agent calls to tell you the appraisal came in below the agreed-upon sales price. This situation sinks many hopeful sales situations.
The good news is that a low appraisal doesn’t have to be a deal killer. Your agent can make all the difference when it comes to bouncing back from a low appraisal by working out the options. Getting everyone on board to save the sale. #appraisals
Get ready to Negotiate? Here are six options you can use to save the sale.
1. Reduce the price of the house to the appraised value
As the seller, you can always sell the house at the appraised value without negotiating with anyone. This is the fastest way to resolve the issue of a low appraisal, but it could mean leaving money on the table. Remember, a ready buyer is worth something to you. Who knows when the next approved buyer will come along?
2. Have the buyer make up the difference
In some cases, the buyer will have enough cash on hand to cover the difference between the appraisal and the selling price at closing. If the buyer feels confident that the value is there for her — despite the appraisal — she can simply add cash to the down payment, and the lender should be satisfied.
3. Meet in the middle
If both parties still want to save this sale, it could make sense to split the difference, with the seller dropping the price a bit and the buyer adding cash to the down payment.
This solution depends entirely on the relative willingness and financial positions of the two parties. Remind yourself this is a dance, not a cage fight.
4. Challenge the appraisal
This option is a bit of a long shot. Only the appraiser’s client, the lender, can demand a review of the appraisal. As the seller, you can support the buyer in this effort by sharing the competitive market analysis that you received from your agent. If the lender does not have a compelling reason to doubt the appraisal, then that tends to be the end of the line.
5. Put the house back on the market
Let the deal fall through and put the house back on the market. There are more offers out there. If the buyer will not put more money down, and you are disinclined to reducing the price, move on. There are more fish in the sea.
This can be disappointing to everyone involved. But if you are in this situation because multiple offers brought the offer price above the asking price, then it might not be a bad way to go. You could receive a cash offer when your agent relists the home. In that scenario, the appraisal won’t be an issue. Plus, even without the cash offer, another lender’s appraiser could have a more favorable point of view.
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On the downside, remember when scrapping your deal, you are putting yourself that much farther from a closed sale.
This is where your agent is beneficial. Your agent understands what the market is doing and can clarify your options so you can make the best decision for that moment. But, of course, you might also have other options, as rules vary from lender to lender and from state to state.
6. Stay calm
Stay calm and rock on. The most challenging tactic is also the most simple — above all, stay calm, look at the facts, and let your agent do the negotiating. You can not know your buyer’s mind, so keep a cool head and remember everything works out in the end.
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Copyright © This free information provided courtesy L.A. Loft Blog and LAcondoInfo.com with information provided by Corey Chambers, Realty Source Inc, BRE#01889449 We are not associated with the homeowner’s association or developer. For more information, contact (213) 880-9910 or visit LAcondoInfo.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.
