How Home Buyers Can Deal With a Low Appraisal |
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By: Jonathan Alfonso Smith Posted: 2010-06-20 08:44:05 |
| Low appraisals is something that home buyers need to deal with, no matter what kind of real estate market the area is currently experiencing. It's something you need to understand so that you'll know how to act when you get a low appraisal. Getting low appraisal can really derail your plans to buy a house. Say for example that you looked through La Jolla homes for sale and decided to make an offer on a La Jolla real estate property which you feel is just right for your budget and fits the preapproved amount that you are able to borrow from a lender. Getting a low appraisal means that you probably will need to pay for the difference in amount not covered by the loan, or that you need to look for a different property which would do better in the appraisals.There are several reasons why lenders give low appraisals for a property. Here are just a few:1. The price of the property you are buying has been inflated because of multiple offers placed on it. This means that it's an artificial inflation, which may make it harder for the lender to recover the loss should you default on mortgage payments, because the value of the house really isn't as high as it is being projected to be.2. A decline in the market values of houses in the area because there are more people selling their house than people buying houses.3. The property is overpriced. At times appraisals can give you a clue on whether the price of a property is fair or not. If you can't see any other reason for a low appraisal other than that, it may be time to renegotiate the price of the property.4. Incorrect evaluation by the appraiser.There are other factors that affect appraisal results. What can you do when you get a low appraisal?1. Pay the difference in cash. Of course, a low appraisal doesn't mean that you don't get to borrow money from the lender anymore. If you have the money and you really want to buy that piece of property, you can just pay for the difference and get on with the buying process.2. You can negotiate with the seller to lower the price of the house. Especially if you've determined that the house is overpriced, or if the seller has a financial situation where he really needs to sell the house right away, this arrangement could work.3. Request a second appraisal. If you feel the appraiser made a mistake appraising the value of the property, you can always ask for a second appraisal.4. Give proof that the appraisal should be higher. You can do this by presenting a list of comparable properties.5. Cancel the transaction with the seller. This is why it's important to have a contingency in the contract saying that as the property goes into escrow, you can get out of the transaction should the appraisal be lower than expected. This way you can get your earnest money back after backing out of the deal.Jonathan Smith is a writer specializing in a variety of topics including real estate. Learn more about how to find quality La Jolla homes for sale as well as find comprehensive La Jolla real estate listings in our website. |
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