If your appraisal comes back low, here are your three options.

Today we want to walk you through what happens when an appraisal comes in low. This occasionally happens, depending on the type of market we’re in.

Here’s what a low appraisal situation might look like: Let's say we have a contract for $500,000 and the buyer is putting 20% down. This means that they’re only borrowing $400,000. People think that the appraisal only has to reach $400,000, but that's not the case. The bank is only going to loan the percentage on the appraised amount. If that appraisal comes in at $480,000, for example the bank is still only going to lend 80% of the financed amount. You’d only be able to borrow $384,000 in this case.

If your appraisal comes in low, you have three options:

1. The seller will come down in price to match the low appraisal.

2. The price is renegotiated to meet somewhere in the middle. This is the most common resolution.

3. The seller doesn't lower the price and the buyer chooses to cancel the transaction.

If you have any questions about low appraisals or anything else related to real estate, please feel free to reach out to us. We look forward to hearing from you soon.