A home appraisal has come back below purchase price - What's next?

by John Colby 10/18/2023

The process of purchasing a home can be tedious, as there are many legalities and service providers you’ll work with to accomplish buying a property. One of these vital steps is the appraisal process, in which mortgage lenders send over a professional appraiser to examine a property.

This is done to make sure its value is equivalent to the loan amount being requested. If you get a low appraisal offer, it’s valuable to know your options to proceed forward in the most orderly way possible. 


What happens if an appraisal comes back lower than the offer price?

Sometimes the appraised value of a home will come back lower than the requested loan amount due to a number of factors. If the home fails to meet certain guidelines, your lender may decide to offer you less funding than originally requested or may not agree to the loan at all. 

However, there are options in favor of the buyer in the case a home appraisal comes in lower than expected. 


How do you negotiate with a seller after a low appraisal?

In the case of a low appraisal, it’s essential to do research to get a better understanding of why the report came back lower than the purchase price. Research the local real estate market because in some cases, if the home has been on the market for a while, the listing price may be outdated. 

If the low appraisal was justified, you can negotiate with the seller to help pay for needed repairs or ask if they can meet you in the middle with their listing price. 


Can buyers back out if the appraisal is low?

If there is an appraisal contingency in the purchase agreement, a buyer can back out of a home purchase if the appraisal comes back too low. This is why it’s vital to examine and pay close attention to detail with the help of your real estate agent to all items in the purchase contract. 

A low home appraisal isn’t the end of your home buying process, it’s simply an obstacle that can be overcome with research and planning. 


About the Author
Author

John Colby

I have lived in the Athol-Orange-Phillipston  area for most of my life. I graduated from the Athol-Royalston Schools and Boston College in 1973.  I have been an active real estate  Broker since 1973.. I have First hand knowledge of all the various aspects of working and living in our area.
For over 40 years I have  maintained a presence in the real estate market through building new homes while buying and selling all types of real estate. I offer first hand knowledge and experience to Buyers and Sellers in our unique market area . I also have a keen interest in Waterfront properties, land and income properties. We are also currently focused on bringing new businesses into our area including  Commercial , Mixed Use and Retail Development along the Rt 2 corridor including into the North Quabbin Business Park and the Greater Gardner to Athol-Orange areas.
   I will to give you the benefit of my training and experience and the most personal service and attention that you deserve.