What Happens With a Low Appraisal
One of the more pressing concerns I see with clients is the appraisal, they have questions and concerns regarding time frame and outcome. It makes complete sense because it’s such a crucial part of the loan process and no one wants a low appraisal. On the same note clients want to know the home they are buying is valued correctly. Here is the timeline and options when it comes to your appraisal:
Timeline: What to Expect
Step 1: Ordering the appraisal
When you meet with your loan officer to sign your mortgage application and preliminary documents, there will be a form included in the package that requires your credit / debit card to order the appraisal. Once all the forms are completed they will be submitted to the lender for approval. You will then see the charge on your credit or debit card.
Step 2: When to Order
I try to order the appraisal after the home inspection has been completed. As a client it is your responsibility to schedule the home inspection and attend. After this, you will receive a report of the condition of the home, if you are satisfied with the report, please let your lender know and they will continue with ordering and scheduling the appraisal. It’s good practice to not order the appraisal prior to the clients approval of the home inspection.
Step 3: Scheduling the appraisal
Because the appraisal is often confused with the home inspection, it is important to note that the client schedules and attends the home inspection, the lender schedules the home appraisal. Clients need not attend the appraisal. Lender will schedule and complete this part of the loan process for you, and send you a copy of the appraisal after completion.
When The Appraisal is Complete
At this point you’ve received the appraisal back and it could be 1 of 3 things: high, low or right on the money. The only time you must concern yourself is if it comes in low. The important thing to remember is that you are dealing with professionals and a low appraisal does not necessarily mean everything is falling apart. Depending on how low the value is, most times it can be negotiated and fixed in one way or another. Here are your options:
Option 1: Bring in more money
Not always the most popular, but it is an option. If your appraisal comes in low, you have the option to bring in the difference out of pocket. Lenders will not loan more money than the property is worth.
Option 2: Seller can come down on price
Depending on how low the appraisal comes in, this is an option as well. Buyers must remember that a seller likely owes something on the property and their ability to negotiate is limited by this.
Option 3: Meet in the middle
In an effort to compromise it is acceptable to have the seller come down on price and the buyer bring in additional money.
Option 4: Walk away
This is the option all parties want to resort to last, we’ve likely all worked very hard to come to this point and it would be a shame to walk away. Although if no resolution can be had the buyer is able to walk away from the contract with no penalty (if they had the foresight to check the “appraisal contingency” in the original offer)
I hope this has been informative and assisted you with your appraisal questions. I am always available if you have further questions about different things in your mortgage loan, do not hesitate to reach out!
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Justin Scott
Loan Officer
NMLS 878581
- C) 920-530-4484
- O) 920-490-8823
- F) 920-490-8967
Executive Mortgage
NMLS 271650
909 . E Walnut Street
Green Bay WI 54301