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What can you do if you get a low home appraisal?

A low appraisal affects both the buyer and the seller. For the seller, it means that the asking price is higher than the property value as determined by the appraiser. For the buyer it means a lower mortgage, and that changes the financing picture. In some cases the lower appraisal protects the buyer's interests, warning that the asking price is in fact too high and the transaction should be reconsidered. For whatever the reason, a low appraisal means that the lending procedure is on hold.

There are a few ways of dealing with a low home appraisal situation. First of all, you may be convinced that the appraisal is inaccurate, and you can get a second appraisal. The appraiser must be from an approved list given by the lender. There is always the option of filing a complaint to the state licensing agency if you feel that the appraisal is a misrepresentation and the appraiser is unwilling to listen. The low appraisal could be due to maintenance issues, in which case the seller may agree to make the necessary repairs. In this case the appraiser could check again and adjust the appraisal. Sometimes negotiation is an option. The seller may be willing to lower the asking price, or the buyer may be willing to increase the down payment and adjust the loan amount to the home appraisal value that the lender will approve.

Sometimes a low appraisal leads to cancellation of the transaction due to financing difficulties. A contract usually includes a loan contingency. This stipulates that your offer for purchasing the house is contingent upon receiving a loan based on the agreed terms. If the bank will not finance your loan due to a low appraisal, you can cancel the contract and the seller has to return your deposit.