You’re in the final stages of selling your home: it’s time for the home appraisal. But when the buyer shares the appraisal report, it shows your home value as less than your sales price. What do you do now? Learn about what could have caused the lower appraisal and your options for moving ahead with selling your house.
Common Reasons for an Appraisal Below Contract Price
To determine the market value of your home, an appraiser considers many factors. Some of those factors, such as the condition and features or your property, you can control. Other factors, such as the home’s location and the total lot size, as well as comparable properties within the area and market conditions, you can’t control.
Here are some common causes for a lower-than-expected valuation:
- Market values are changing in the area.
- There were foreclosures or short sales in the neighborhood.
- Your property is not well-maintained.
- You overpriced the home.
Make Sure the Appraisal Report Is Accurate
Although changes to the appraised value are not common, you can consider appealing the appraisal if you find a factual error in the appraisal report. For example, if the appraiser indicated two bedrooms instead of three bedrooms or there is an error in the gross living area.
If you didn’t receive the appraisal report from the buyer, contact the buyer’s real estate agent to request a copy. Then, carefully look through the appraisal report for errors. Were features accurately described? Did the appraiser adjust for differences between your home and the homes used for comparison purposes? When looking at the appraisal report, remember that if the home has a finished basement area, appraisers are required to report that area separately and not include it in the gross living area.
If you find errors, describe the factual errors in a letter and contact the homebuyer’s lender to ask about the procedure to fix errors. Do not try to contact the appraiser directly.
Options for Moving Forward with Selling Your Home
If the appraised value of your home is below your sales price, you still have options to move forward with selling your home — even to the current buyer.
- Ask your buyer to make up the difference in cash. The buyer will only be able to take out a loan for the appraised value of the home, but the buyer can pay cash for the difference between the sales price and the appraised value.
- Lower your asking price to match the appraised value. Agreeing to accept a lower amount reduces your profit but keeps your home sale on track.
- Wait until a comparable home sells at a similar price and get a new appraisal. The value of your home is heavily influenced by the housing market in your area. If a comparable home in your neighborhood sells at a higher price than what you were asking, you may be able to obtain a new appraisal with a higher result.