when the house doesn’t appraise

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One major hurdle of the home selling process is the appraisal. Sellers and agents alike are optimistic about the market and anticipate rising prices. As a listing agent, my goal is to get as much money as I can for my seller. And while I may be able to get a buyer’s agent and buyer to offer what we’re asking, sometimes the appraisal comes up short. Here I’ll discuss the seller’s options when the house doesn’t appraise.

1. Appeal the appraisal. I don’t know about you, but I’m not perfect. Appraisers aren’t either. If there’s convincing evidence that the appraiser used incomplete or inaccurate information to create the value for the house, ask for an appeal.

2. The buyer can bring extra cash to closing. Buyers who have been inside lots of houses know a good deal when they see one. It’s not uncommon for a buyer to feel very passionately that the house they’re buying is worth what they offered to pay for it. Last spring, I had a buyer pay $10,000 more than the appraisal because he felt the house was worth it. This means he paid his down payment for his loan, plus his closing costs, plus the difference between his loan amount and the appraised value.

3. Buyer and seller can agree to split the difference. Let’s say the purchase price is $500,000 and the appraisal comes in at $490,000. Buyer can offer to pay part of the $10,000 shortage and seller can agree to reduce the sales price for the remaining amount. In this example, if the buyer offers to pay $4000 more than their loan amount and seller agrees to reduce the sales price to $496,000, they can move forward to closing.

4. Seller can reduce the sales price. If the seller agrees to reduce the sales price to match the appraisal, the buyer is obligated to buy the house. This is the only option that gives the buyer no option but to move forward with the transaction.

5. Buyer and seller can terminate the contract. Nowhere in the South Carolina real estate purchase contract does it say that the seller is obligated to reduce his sales price if the appraised value doesn’t meet or exceed it. He is obligated to sell if it matches the sales price or exceeds it, but not if it is below the sales price. So if the seller refuses to reduce the sales price and the buyer cannot or will not bring extra cash to closing, the seller does not have to sell.

6. One last thought: if the buyer is paying cash for the house and the appraisal comes in lower than the sales price, buyer and seller can agree to remove the appraisal contingency from the contract and move forward with the sales price as-is.

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