A low appraisal, in which the appraiser's opinion of value is lower than the sale price or loan amount, is a common occurrence in weak real estate markets and can mean trouble for the buyer and seller.
Implications of Low Appraisal for Buyer
If the house is deemed to be worth less than the sales price or loan amount, the lender typically won't approve the buyer's loan. That can happen even if the buyer has been pre-approved, since a pre-approval usually is contingent on an appraisal that's acceptable to the lender.
Implications of Low Appraisal for Seller
If the appraiser doesn't believe the home is worth as much as the buyer has agreed to pay for it and the buyer can't get financing for the agreed upon price, the seller may not be able to sell the home. Even if the seller can find another buyer, it is possible that the low appraisal will happen again.
What Happens After a Low Appraisal
One way to overcome a low appraisal is to find a mistake in the appraisal data and ask the appraiser to reconsider. Another option is to renegotiate the sale price to a lower amount. Sometimes the sale can proceed if the buyer makes a larger down payment.
- House for sale image by fejas from Fotolia.com