Appraisal Woes

[Ryan O.]

Long story short, we just completed a rehab put it on the market a couple of Fridays ago, and had five offers on the property by the end of the weekend. We had several offers at or near list price, and decided negotiate with one that had a conventional loan w/20% down, as opposed to several FHA and VA offer above the conventional one.

Appraisal came back today 20K under the contract price of 253K. We knew going in we may have a little trouble based on the comps in the area, and we made a huge mistake of not being around when the appraiser came by (that's a story for a different day).

What are our options at this point? Obviously we could decrease the contract price to 233K, or possibly meet in the middle.

What are the underwriting rules regarding low appraisals with conventional financing. Since the loan amount will still be under the appraised value, will the lender still write the loan? The buyers will just have to pay PMI correct? 86.8% LTV vs 80%LTV.