The Appraisal Came in Low. Does the Seller Have to Lower the Price?

You're selling your home.

You accepted an offer you're happy with.

Inspections are moving along.

Then the appraisal comes back.

Low.

And now the buyer says the home didn't appraise for the contract price.

The first question sellers usually have is:

“So do I have to lower my price?”

Not automatically.

A low appraisal creates a problem we need to solve.

It doesn't mean the appraiser just renegotiated your sales price for us.

What Does a Low Appraisal Actually Mean?

When a buyer is financing a home, the lender generally orders an appraisal to evaluate the property's value as collateral for the loan.

If the contract price is $650,000 and the appraisal comes back at $630,000, we now have a $20,000 appraisal gap.

The lender's financing will generally be based on the appraised value rather than simply ignoring the difference. Recent consumer guidance notes that a low appraisal can delay or jeopardize a transaction, but buyers and sellers have several possible responses.

This is where the negotiation starts.

Option 1: We Review the Appraisal

Before I start talking about reducing your price, I want to see the report.

What comparable properties did the appraiser use?

Were there relevant sales that weren't considered?

Were upgrades or property features accurately reflected?

Is there factual information in the report that needs to be corrected?

If there's legitimate support for challenging the value, we can explore the appropriate reconsideration process.

I'm not promising an appraisal is going to change.

I'm saying I'm certainly going to look at the evidence before asking my seller to give up money.

Option 2: The Buyer Can Cover Some or All of the Gap

A low appraisal doesn't automatically become the seller's financial responsibility.

Depending on the buyer's finances and the terms of the contract, the buyer may be able to bring additional funds toward the difference.

Maybe all of it.

Maybe part of it.

That depends on the transaction.

Option 3: We Negotiate

Maybe the seller moves some.

Maybe the buyer moves some.

Maybe another term changes as part of the negotiation.

What I'm not doing is immediately saying:

“Well, it appraised low, so I guess we have to drop the price.”

No.

We're going to look at the contract, the appraisal, the buyer's position, your position and the leverage we have before deciding our response.

Can the Buyer Walk Away?

That depends on the contract and whether the buyer has an applicable appraisal contingency or another contractual right to cancel.

This is why the terms we negotiated before accepting the offer matter so much.

The highest offer isn't always the strongest offer.

When I'm reviewing offers with a seller, I'm also looking at financing, contingencies, timelines and the likelihood that the buyer can actually perform if something like an appraisal issue comes up.

Because getting into escrow is not the finish line.

Closing is.

My Advice to Sellers

Don't panic when you hear “low appraisal.”

And don't immediately agree to a price reduction.

First, let's figure out:

How big is the gap?

Does the appraisal make sense?

What does our contract say?

What is the buyer capable of doing?

What leverage do we have?

Then we respond strategically.

My job isn't to simply deliver the buyer's request to you.

My job is to protect your position, challenge what should be challenged, negotiate where we have leverage and keep as much of your equity in your pocket as the transaction allows.

That's seller representation.

Mercedes Erhahon – RESWealthy Team
Real Brokerage, Powered by PLACE
909-413-0602
www.RESWealthyTeam.com