When you make an offer on a property, both you and your real estate agent should have a solid idea of what the appraised value will be.
If you’re surprised by the value the appraisal assigns to the house, your next steps will depend on whether the appraisal was high or low.
If the value from the appraiser comes back higher than what you agreed to pay for the property, then there would be no issue for you. Congrats! You have immediate equity.
However, if the value comes back lower than the agreed upon price, a few issues will come up. The first is a question as to whether the value that came back is correct.
Recent sales of similar homes in the area could drive down the value if they are lower than your contract price. You and your real estate agent can ask for a review of the appraisal through the appraisal management company who sent the appraiser.
You may also order a new appraisal with a different management company and appraiser, if your lender will allow it. In this case, you would have to pay for the second appraisal as well as for the first.
Since the lender will only lend money based on the lower value of the two (appraisal or contract price), one of two things must happen if the value remains low. Either the sale price must come down, or you must cover the difference between the appraised value and the sale price.
If the seller is unable or unwilling to lower the price, then you would either come up with the difference or move on to another property.
Would you like more information about this process? Feel free to contact me with any questions you may have.