What do I do if it doesn’t appraise? With low inventory of homes on the market we are seeing buyers flock to new listings and multiple offers flooding in. Buyers are getting frustrated; “will I ever get to buy a home?” lamented one I spoke with recently.
Just because you outbid the competition doesn’t mean smooth sailing from here. If you are financing, the home still has to appraise. If the best comparables are thousands under your accepted offer you may be in a difficult position.
A lender will finance X% of the selling price or the appraised amount, whichever is LOWER. If you planned to put 20% down but the appraisal came up $25,000 lower than your offer, we have a problem.
Our standard form contracts in Washington anticipate this on our Financing Addendum or if you are paying cash, I would use an Appraisal Addendum which states in essence that in the event the home does not appraise for the contracted price, there are options.
The seller can agree to reduce the price.
The seller can pay for a new appraisal, subject to the lenders approval for a second opinion.
The buyer can make up some or all of the difference in cash, subject to the lenders approval.
The buyer can rescind their offer based on the low appraisal.
Because addendums are legal documents and are updated periodically please read the actual form if you find yourself in this situation. How each situation plays out will depend on the motivation of the parties involved and the competency of the appraiser. A seller may get a million dollar offer on a modest house, but it still has to appraise.
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