You are in shock after receiving a low appraisal for your home.  A solution to your situation awaits you at Palm State Mortgage.

Solution for Low Appraisal at Palm State Mortgage

If your appraisal is shockingly low, you might see the valuation of your property flipped upside down. It might not be the right time to sell your home. 

In fact, this week’s blog, brings you several solutions for your understandable shock.  If this has not happened to you, but you are worried about an upcoming appraisal, this blog is especially for you. Likewise, we want to bring a few mortgage deal solutions to those of you who have already received a low appraisal.

So, here we are at Back to School time, and this blog will take you back to school—mortgage school—that is.  It teaches you how to find a solution to a low appraisal situations.  At the very least, we hope you will learn to cope with a low appraisal.

Why Did This Happen To Us?

When you are hit with a lower than expected appraisal, there can be quite a few reasons your home did not achieve your estimate of its value.  And all of them are not your fault.

Low Appraisal in a Seller’s Market

For example, multiple offer situations can force your purchase price down over comparable sales of homes in your neighborhood.  Thus, appraisals will be low.

Low Appraisal in a Buyer’s Market

Alternatively, if your home is appraised in a buyer’s market, everyone’s prices are falling.  Again sellers know and fear that their home appraisals will be less than what they hoped for.

Students, the lesson to learn here is simple.  The housing market is not your call and low appraisals occur even if the said market is hot, cold or in between.
Why Do Low Appraisals Happen?

So, before we give you some solutions for that low appraisal situation, let’s explore some reasons your house might garner less than your estimate of its value.  There are a number of reasons why appraisals come in low.  Here are a few:

Overpricing by the seller –

Admit it.  You might have hired a realtor who marked the price tag of your house too high.  Calculating a price is a delicate art.  Experts explain that they do it like this:

Solution To Low Valued Home.

Solution To Low Valued Home.

A.    Compare similar properties.

B.    Adjust for the differences among them.

C.    Track the recent housing market movements.

D.   Take stock of present inventory of homes in the neighborhood.

Coincidentally, your home appraiser will make his decision based on the same criteria.  Your appraiser will study before and after he walks around your home.  If a slight overestimation happens in each set of mathematics, your home could fall out of the range of value for your neighborhood.

Selling Conditions of Area Homes:

Perhaps there are no comparable homes in the area like yours and no homes in the same price range.  However, there are plenty of foreclosures and short sales in your area.

Pending Sales – Some of the houses on your street might be approaching the dates of their closing.  However, the appraiser missed their information.  According to his data, they have not sold.  Had he known the deals were made and homes were sold, the data could have given your home the benefit of comparable sales.

Understanding Price and Value:  Perhaps your appraiser didn’t understand the above-stated influences on price and value.

Palm State Mortgage Company’s Favorite Solutions for Low Appraisals

Overstressed home buyers and sellers often panic when the appraisal hits low.  Did you forget that a low appraisal doesn’t necessarily mean the end of the deal?  Keep calm and consider compromise.  We can find solutions for both buyers and sellers.

Stress-Free Solution Number One:  Making up the difference

The Buyer can make up the difference between the loan and the appraisal in cash.  You see, we know the lender looks at the appraisal only for figuring the significant loan-to-value ratio.  The low appraisal means the lender will still make a loan on the contract, but only for the appraised price.
Experts tell us that sometimes the buyer’s lender forbids the buyer to do this.  However, this can be worked out by allowing the buyer to pay some of the seller’s closing costs.

“Likewise the seller can offer to carry a second mortgage for the difference.  If the buyer really wants the home but cannot come up with the difference in cash, making payments or a lump sum payment at a later date to the seller is an option.”

Seller’s Simple Solution Number Two: Lowering the price

Perhaps you and your realtor set an unrealistic price on the home in the first place.  Upon reflection on how difficult it is to capture a good buyer, you might decide to take the deal.  You make the buyer happy and the lender happy.  Plus you do not have to take the time to find another buyer.  After all, the second buyer’s appraisal could be just as low as the first buyer’s.

Super Solution Number Three:  Ordering The Second appraisal

Utilizing this solution depends on the type of loan involved in the deal.

Banking Your Home Savings or Profits.

Can you sell your home for a profit?  

FHA Loan:  Did you know you can ask the lender for a list of approved appraisers? Then pick out someone from the list and purchase another appraisal.  Depending on your situation, the price of a second appraisal can be paid by either the buyer or the seller.  Suppose your first appraiser was a beginner.  What if he made some honest mistakes?  The second appraisal might be higher or more on target than the first one.

Conventional Loan:  When your loan is a conventional loan, then it is subject to the rules of the Home Valuation Code of Conduct (HVCC).   Thus, if you discover the appraiser does not have knowledge about your local market, you have the right to actually demand a local appraiser.

We have more details about solutions for low appraisals, but we will present them in our next blog, Part 2 of our coverage of this topic.

Palm State Mortgage Company thanks for reading this week’s blog, and we welcome you to visit often.