What if your appraisal and purchase price differ?

On Behalf of | Apr 6, 2023 | Real Estate Transactions | 0 comments

Most banks, when working through a lender, will not lend you the full amount if a property appraises for less than you offer. Thus, if you make an offer and the appraisal sets the value of the property to 10 percent less, the bank will only lend 90 percent.

A seller might attempt to get you to waive your appraisal contingency. How can you avoid this?

What is the appraisal gap?

Forbes discusses the appraisal gap. This is the difference between the offer a person makes on a home, and the amount the home gets appraised for. For example, say a person puts forth $350,000 as an offer on a home, but it gets appraised at $300,000. The $50,000 difference is the appraisal gap.

Ask the lender to challenge the appraisal

A lender is the only person who may officially put forth a dispute against the appraisal. They can also put in a request for a second appraisal. You can ask the institution to get a request for consideration of value (ROV).

Get a different final price

Another way of handling this issue is by simply renegotiating the final price. Speaking with the seller is the first potential step to take, after all. A buyer can ask a seller to meet them halfway on the difference. For example, in the aforementioned scenario where $50,000 is the appraisal gap, the homeowner could either pay $25,000 or deduct that from the cost of the house.

Appraisal gaps can cause many financial issues, so it is best to work quickly to resolve them and proceed with the purchase process.