Buyers: What To Do When Appraisals Come In Too High/Low?

As a buyer, working with a lender, you're going to be dealing with appraisals.

It's the only way the bank or lender knows what the property is actually worth.

But on the rare occasion when the appraisal comes in too LOW or too HIGH, what do you do?

Now in most cases, appraisals will come in either a few hundred, or a $1-2 thousand dollars over or under the list price.

Basically not enough to mess up the deal.

But on a recent deal of mine, the appraisal came in almost $50K lower than the list price.

Now as a buyer, that's a good and bad thing.

It's good because you could essentially get a massive discount.

OR

It's Bad because most sellers aren't prepared to sell when it comes in that low, and will try to negotiate a value above the appraisal.

And your lenders WILL back out because they are potentially funding an over-leveraged property.

So unless the seller is willing to come down to the appraised price, or you are willing to bring more money to the table at closing,

Your lender will back out…

So you need to decide…

• How bad do you want the deal?
• Are you willing to negotiate?
• What's your bottom line?
• Are you willing to walk away?

In most cases we would suggest not paying over the appraisal.

It overleverages you, and in most cases it's risky.

When the appraisal comes in much HIGHER than the list price, that means you probably got a good deal.

But you can't loan against the equity, or have your closing costs covered by it because your LTV is based on the lower of the sale price or the appraised value.

Down the road, when you sell your home or when you refinance your home, is when you will be able to take advantage of the additional equity.