What happens when appraisal is lower the listing cost?

Question

Purchasing a SFH in Indiana for $75K, with conventional financing. However, the appraisal came back at $65 K. Asides from paying the difference on close date, what strategies can we do to not let this deal fall through?

This is my first investment property, any insight will be much appreciated.

Thanks in advance.

This is my first investment property, any insight will be much appreciated.

Thanks in advance.

Lien Vuong · Answer

I would definitely address it with the lender and negotiate with the seller. They have equal incentive to make it work also.

Russell Brazil · Answer

Switch lenders to get a new appraisal.

Miguel Horta · Answer

Thanks @Alexander Murillo and @Thomas Corley . I have a call with my agent soon, I will go over some strategies with her if the seller wont come down on the purchase price.

Effram Barrett · Answer

You could see if the seller will come down to the appraisal price, but that may be unlikely in this market. You could also contest and have another appraisal done.

If you have your appraisal contingency then you could back out, but here's not much lemonade to be made out of these lemons.

Gloria N Gear · Answer

Great feedback everyone!  I am Miguel's agent and we were able to get them to come down to the appraised price (but lost some repair credit - wish I could have negotiated both).  I also have fought several other appraisals and won them by proving to the appraiser that there were better comps in the area - sometimes they will concede, sometimes they won't.  And yes, switching appraisers and/or lenders is also good options.  Whatever the situation calls for and makes for a win-win situation is what works.

Cody Neumann · Answer

@Miguel Horta

If you don’t feel the appraisal is correct you could try having your agent renegotiate with the appraiser and tell them why they think it’s worth 75k

Dan Maciejewski · Answer

When the appraisal comes in low, you have a few options.  You've heard most of them here.  To summarize:

1. Negotiate the sales price to the appraised price.  There are some negotiation tactics that can help -- hopefully your Realtor or you have used them before.  Surprisingly, a lot of people skip this step!  Always ask for the price reduction!

2. Negotiate to meet somewhere in the middle between contract price and appraised price.  Called "splitting the difference."

3. Find a new lender and get a new appraisal quickly.  Or get an extension from the seller while you find a new lender and appraisal.

4. Cancel the contract and let them find a new buyer.  Even if you're out of contingency periods, which it sounds like you're not, most sellers just release EMD in this market.

Alexander Murillo · Answer

@Miguel Horta appraisers make mistakes and are often willing to up the value if you present a good argument with comps/market data. I've done this several times for both myself and clients and have gotten appraisals up 10-20k. Have your agent get to work on that for you

Thomas Corley · Answer

@Miguel Horta Negotiate, negotiate, negotiate! ￼Do you have a appraisal contingency in the contract?

If not, you can still negotiate with the seller especially if you might back out let them know we’re your at and let them know they will have to deal with this appraisal with the next buyer!

I have had very good luck negotiating with client on this exact problem the seller in most cases wants to sell the house.

Good luck!!￼

Miguel Horta · Answer

Thanks all for the reply. Ill see if they want the counter at lower cost. If not, I can see what we can do about getting it re appraised. $5k is alot more doable then $10K.

What happens when appraisal is lower the listing cost?

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