What to do if an appraisal comes back low!

Suppose you are in a transaction and the appraisal comes back low. WHAT NOW?

As a Buyer, you have some options.

Contractually, in Utah, and if you have used the approved Real Estate Purchase Contract and included the Appraisal Contingency, here are your contractual options:

2.4 Appraisal Condition. Buyer's obligation to purchase the Property   IS  conditioned upon the Property appraising for not less than the Purchase Price. This condition is referred to as the "Appraisal Condition". If the Appraisal Condition applies and the Buyer receives written notice from the Lender that the Property has appraised for less than the Purchase Price (a "Notice of Appraised Value"), Buyer may cancel this Contract by providing a copy of such written notice to Seller no later than three days after Buyer's receipt of such written notice. In the event of a cancellation under this Section 2.4: (i) if the Notice of Appraised Value was received by Buyer no later than the Appraisal Deadline referenced in Section 24(e), the Earnest Money Deposit shall be returned to Buyer; (ii) if the Notice of Appraised Value was received by Buyer after that date, the Earnest Money Deposit shall be released to Seller, and Seller agrees to accept as Seller's exclusive remedy, the Earnest Money Deposit as liquidated damages. A failure to cancel as provided in this Section 2.4 shall be deemed a waiver of the Appraisal Condition by Buyer. Cancellation pursuant to the provisions of any other section of this Contract shall be governed by such other provisions.

So, according to the contract, your only option is to cancel the contract OR waive the Appraisal Condition.

If you waive the Appraisal Condition, you will likely need to bring more cash to closing. Let me explain.

If you are purchasing a $500,000 home with 20% down payment, your lender will be loaning you 80% of the value of the home, or $400,000, leaving you with only $100,000 to bring in as Down Payment.

Well, if the home only appraised at $480,000, the lender will only lend you 80% of $480,000 or $384,000. Meaning that you now have to bring in an additional $16,000 in cash to close on this home.

But, are those really your only options?

Contractually, yes. But, what if you had someone on your side who could help you renegotiate the terms of that contract?

With enough persuasion, maybe the Sellers would lower their price to the Appraised Value. If they balk, perhaps deadlines could be moved and arrangements could be made for a second appraisal to be done. Maybe an agreement could be made to split the difference between the two appraisals. All is not necessarily lost.

If the Seller is faced with losing not only your sale, but possibly running into the same Appraisal problem with a subsequent Buyer, they may renegotiate.

There are many ways to help a Buyer in this situation. But it takes knowledge and experience in order to work these things out and time is of the essence. Remember, contractually, you only have 2 options, and if you can't work something else out fast, you will run out of time. 

In today's market, you need someone who will help you understand what ALL your options are and go to bat on your behalf.

If you are thinking about moving to the Salt Lake City area, make sure you get an Agent on YOUR side! 

Homebuyer Representation, Inc. is the only Real Estate Brokerage representing Buyers ONLY in Salt Lake City and the Surrounding Area. We do not list any homes. We never represent Sellers.

We work for BUYERS ONLY on the Buyer's side of the transaction.

We work to get BUYERS the Best Price and Terms when they Buy...

We're "The Real Estate Agents on the Buyer's Side" TM

If you have excellent credit and are thinking about buying a $250,000-$500,000 home in the Salt Lake area in the next 60-90 days, call us at (801) 969-8989 or contact us via the link on this page.

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