What to Do When the Appraisal Comes in Below the Sale Price
The pandemic of 2020-2021 caused a lot of people to migrate for a variety of reasons. In the movement of the U.S. population, home prices rose dramatically, fueled by not only motivated buyers and sellers but a low interest-rate environment. Now, with the Federal Reserve raising interest rates to combat inflation, home mortgage rates have also jumped. Still, nationwide home prices remain around a $400,000 average, historically high.
Here in Tacoma, Washington, the median price for a home now stands at $460,000, according to Redfin.
With the pressure on buyers because of higher mortgage rates, however, the value of one’s home – as determined by professionals known as appraisers – can play a huge role in a real estate transaction. The seller obviously wants to receive a robust appraisal or home valuation, to get top dollar in the sale. The buyer might even welcome a lower appraisal, so their mortgage financing can be more affordable.
Appraisals are often based on a couple of primary factors. One is the physical condition of the property as determined by a walk-through inspection, and the other is the consideration of “comps,” or comparables. Comps refer to what other similar homes are selling for in the same neighborhood.
If you’re a seller or home buyer in or around Tacoma, Washington, whose real estate transaction has been stalled by a low appraisal, there are options available, including challenging the appraisal. The real estate attorneys at Curiale Hostnik PLLC can help you resolve the situation and get the deal back on track.
We will provide you with personalized service and utilize our years of experience in real estate law to sort everything out. We serve clients in Tacoma, and Pierce County, including Puyallup, Gig Harbor, University Place, and Lakewood, Washington.
The Appraisal Process
If you’re a seller, you want to ensure your home is given the needed “once-over” before you put it on the market. This may mean painting, repairing, landscaping, or anything else that puts your property in the best possible light. Remember, most appraisals hinge on a walk-through by a professional who will look for every defect or needed upgrade as a way to downgrade the appraised value.
The other aspect, as mentioned, is the average value of similar homes in your neighborhood – comps, in other words. There’s not much you can do about this but to be aware of it when you place your home on the market. If you seek more than similar properties are selling for, you may be in line for an appraisal that is lower than your asking price.
Buyers will sometimes bid above the asking price and above comparables just to get the deal approved. Again, this may lead to trouble with the appraisal, and the appraised value is what a mortgage lender will base its loan amount on.
If the Appraisal Comes in Low, What to Do as a Buyer
If you’re a buyer and the appraisal comes in lower than your accepted offer amount, you have a few options. You can certainly walk away if you had an appraisal contingency in your offer, but you can also renegotiate with the seller and their agent.
You can also just put more of your own money into the deal so the mortgage amount available will cover the transaction. You may even be able to challenge the appraisal. Lenders will generally only consider a challenge to an appraisal if it comes in two percent or more below the asking price.
What to Do as a Seller
As the seller, you can walk away from the deal, but that still leaves the issue on the table of how to get the best value from the sale of your property. You can certainly renegotiate or ask the buyer to come up with more of their own money, or even ask the buyer to challenge the appraisal. If you’re capable of doing so, you can even offer seller financing.
A final step is to delist the property and wait till conditions change. Perhaps rates will go down, and property values go up in six months or a year or so down the road.
Get Straightforward Real Estate Guidance
Whether you’re a buyer or seller in or around the Tacoma, Washington, area, you can rely on the professional and legal guidance of the team at Curiale Hostnik PLLC. We will work with you on any issues, questions, or concerns you have about a real estate transaction and guide you toward the best possible solution. Contact our team today to schedule a consultation.