This question has become a frequent one! Thanks to continued low inventory, and increased competition among buyers driving up contract prices, we’ve started having this conversation more often. Yes, it’s possible your home will not appraise at the contracted price. While this does not happen often, it does happen from time to time. It’s good to know what options you have if it happens to you.
Here’s what you need to know:
The bank will not provide a loan amount greater than the appraised value.
Remember: the house is the collateral for the bank’s loan, so they won’t give a buyer money at closing if it means they’re going to be upside down on the loan from day one.
We can argue the appraised value.
We can have a conversation with the appraiser to better understand the number they came up with, and we can share alternative comparable sales to make a case for a higher price as well. However, this does not often accomplish an altered appraised price.
The buyer can bring additional cash to the table to bridge the difference between the appraised price and the contracted price
This is the most ideal solution for a seller. Of course, this solution only works if the buyer has the means available AND is comfortable paying more for the home than what a third party (appraiser) says the home is worth, but we have seen this happen!
Finally, the contracted price can be adjusted downwards to equal the appraised price.
While this isn’t the most ideal option for a seller, it tends to be the most common solution in keeping the sale together. If you are firm on the contracted price, you could choose to go back on market and hope for a higher appraised value with the next buyer (and lender), but we don’t typically recommend this.
At the end of the day, it’s good to remember that each sale is unique! If you find yourself in this situation, just remember that there are a few options to consider. Make sure to consult your real estate professional to understand each one.