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Five Options for Buyers Facing a Low Bank Appraisal

Five Options for Buyers Facing a Low Bank Appraisal

You’re on your way to buy a new home, congrats! You’ve found the one you love… your offer has been accepted… you’ve completed the inspection with little-to-no issues… you’re almost there, right? There’s just one more hurdle before you’re ready to sign on the dotted line and finance your home—the home appraisal.

If you’re seeking a mortgage, you must have your prospective home appraised for a value that is higher than your purchase price. So, what happens if your bank appraisal comes in lower than that agreed-upon price? Are your home purchasing dreams destroyed? Do you have to start your home search all over again? Hold those negative thoughts!

Even when your bank appraisal comes in low—which can happen for several reasons that may or may not include a bidding war or even an inexperienced appraiser—you still have a few options when it comes to purchasing the home.

Here are five ways to move forward when you receive a low bank appraisal:

1. Make Up the Difference
When a home appraisal comes up short, a simple solution is to pay the difference up front. This option can work for buyers who are ready to put more money down for their new home. However, for a buyer who is already putting down as much as they can, making up the difference due to a low home appraisal may sound like an impossible plan.

2. Work it Out With the Lender
Even if a buyer cannot afford to put any more money down on a new home, they may be able to pay a little extra monthly to cover the difference in price. If a buyer is willing to pay private mortgage insurance until they meet agreed-upon mortgage terms, lenders may still be willing to offer financing. 

3. Negotiate a Lower Price
If you think your bank appraisal came in low for good reason (or even a not-so-great reason), you can try to renegotiate the home purchase price to meet the appraisal. If a home seller is motivated and does not have other offers to consider, they may be more than happy to settle for the appraiser’s price. After all, it can’t hurt to ask, right?

4. Request a New Appraisal
If you think your low bank appraisal missed the mark completely, you can ask your lender for a new appraisal to confirm the findings. A second appraisal could come back over the agreed-upon purchase price. The result? A buyer’s home purchase moves forward with no issue!

5. Walk Away
Though it may seem like the worst-case scenario when it comes to a home purchase you’ve been working toward, if a buyer is trying to stretch their budget to make up the difference between a low bank appraisal and purchase price, the best solution may simply be to cancel the transaction.

Certainly, receiving a low bank appraisal can be discouraging, but that news does not have to ruin your home ownership dreams. If you’re a buyer trying to deal with a low appraisal, be sure to evaluate all your options before choosing the best path forward.