What Happens If My Appraisal Is Low In Virginia?

Contract time!  Whenever I have someone considering buying a place, I always offer to meet them for coffee to go over the process from start to finish, and the details necessary to the process of buying and/or selling real estate.

A very important part of the buying process right now is the appraisal. An appraisal is an independent 3rd party opinion of the market value of a property (regardless of the type of property – condo, townhouse, detached single family home, etc.) If you’re getting a loan, you’re getting an appraisal. Your lender will “hire” a licensed appraiser to do an analysis of value based on recent sales, active listings, type of property, condition, location, etc. This is your reassurance that the price you’re paying for a place is in line with current market values.

Now, if the appraisal comes in equal to or above your contract sales price – you’re good to go! (Remember, if you’re getting cash back from the seller for closing costs, the appraised value must be on the GROSS price of the contract.) If it comes in above the price you’ve agreed to pay – congrats! instant equity!

However, IF the appraisal comes back low, you really have 2/3 options:

1. Approach the seller, provide them a copy of the appraisal, and try to negotiate the contract price to match the value of the appraisal.

1a. If the seller is unwilling to come down in price, and you’re not able to fund the difference, you can void the contract.

2. If you still want to buy the place, even with the low appraisal, you have the option of coming up with the extra cash to fund the difference. Banks will only loan as high as the appraised value.

2a. If you’re unable to gather the funds to make up the difference and the seller is unwilling to come down in price, you can void the contract.

3. If both parties come to some acceptable terms that is a combination of the above – either the seller comes down a little and the buyer comes up with the difference – then you can also proceed.

3a. If this is not a feasible option, you can then void the contract.
Feel free to take me up on my coffee offer, anytime. We go over the process in detail, and I promise, it won’t be scary or overwhelming.