Many people have no idea what to do if an appraisal comes in low on a home they are trying to buy or refinance. There are a number of different options you have based on what kind of product you have. The first big distinction to determine is if it is a home purchase or refinance.
If it is a home refinance, your lender would have started the loan with an assumption of what the appraisal would be, and priced your loan accordingly. If the value happens to come in lower, it could put you into a higher risk loan. If you’re trying to do a cash-out loan, it could also prevent you from being able to take cash out.
For a purchase loan, it’s a little more different and complex. The sales price is set by the sales contract. The lender is only allowed to lend on either the sales price or the appraised value; whichever is lower. When you have a low appraisal come in as a buyer, there are three different ways to handle this:
- Ask the seller to renegotiate the sales contract to bridge the gap.
- Rebut the appraisal by providing the lender additional information for the appraiser to consider that they may have missed.
- Accept the value as-is, and by doing so, cause your cash to close to increased.
That’s kind of the big picture overview of what happens when you have a low appraisal. No matter what happens, your loan officer will be contacting you to resolve these issues as soon as possible. If you have any questions for us, don’t hesitate to give us a call or send us an email. We look forward to hearing from you.