What if the banks appraisal is less than my offer? What happens then?

Question

Is there a contingency we should have made regarding this issue? Or is it standard to renegotiate or just with draw?

Maybe because I live in a very small town, but we started negotiating last night and we have not signed or seen a contract of any kind. Is the norm? So if the banks appraisal comes in lower it is standard/a given that the seller renegotiates the the last offer? Seems to me that if someone came in after me and had an appraisal done they would be in the same shoes; so renegotiating sounds right. But is it? What I'm worried about is if the bank only appraises the home for 88K and we offered 90K; how do we come up with the difference?

Answer 1

If the appraisal is less than the offer, the deal would not go through. I used to teach a home buyer's education class and I always used this analogy: If I asked you to borrow $100 for a candy bar that I saw at Wal-Mart, would you lend it to me? Of course not. We all know that the candy is less than $1. Similarly, the bank is not going to lend you way more than what the house is worth.
Yes, appraisal should have been a contingency on your purchase agreement, but appraisals give you good negotiating leverage. Once the seller knows and understands that his asking price is just too high, he will have no other option but to reduce the price to the appraised value if he wants to sell the house. If you really like the house, try to make a deal. If you're not totally in love with it, you could withdraw your offer....but consult your real estate agent first. Make sure you are able to do so. In most states a purchase agreement is legally binding, meaning when you sign you are agreeing to purchase the home and when the seller signs, he is a agreeing to sell the home. If either one does not hold up to his end of the deal, legal action can be taken. Just protect yourself.
Good luck! :-)

Answer 2

Would this be the same house that’s listed for 96 K your making an offer but don’t have a signed deal yet. If and when the seller counters it you needn’t worry about the appraisal. It sounds like the inspection is where your deal will have a rougher time. You can’t worry about details like a slight difference in appraisal before you’re even in a deal. You will worry yourself sick before you ever close a deal. Have your agent handle those details and ask the agent to explain the process to you again. You seem to be sort of a ditzy type that is under educated and over emotional. You asked this same question and had it answered already

I want some suggestions on an offer price for a 1950's home. Home is listed at 96K, but both bathrooms need..
new tubs and one needs a new toilet. They are original tubs so the hardware has seen better days. The Jen aire range has one burner that doesn't work. How much should I take off the asking price for these repairs? The filter system on the water well needs work also; the owner said he can't open the container in which the salt goes into. Please give me a general idea of how much to take off. I'm considering offering 86.5K. What do you think?
Additional Details
1 day ago
We will be getting a home ispection. What if the appraisal comes in lower than the offer price?


Just imagine if you had to pay list price and where then would you come up with the cash. I would be getting the water issue solved prior to any commitments and be asking the agent and local health department professionals.

Answer 3

It is very rare if that happens because appraisers although being independent, they are getting paid by the bank and they know the price of the house and mortgage amount. They almost always comes up with the appraisal value that is slightly more than the price on the contract. It's their job to do that. If your house is a newly built nice house in a very old neighborhood where all other houses are 30 years old, then I can see your house may get lower appraisal value than the price on the contract (just because the comps appraisers use were sold at much lower price). To answer the question, if the appraisal value came back lower, and if the bank refuse mortgage, you can withdraw the offer or renegotiate because mortgage approval is usually the condition in the contract (read the contract to make sure of that).

Answer 4

House Appraisal Lower Than Offer

Answer 5

The appraisal is for the lender to be sure that the property is worth the amount they are lending. EX: The house is listed at $225,000 and you are buying for $200,000. You are putting down $40,000. The bank is lending you $160,000. They want to see an appraisal of at least $160,000. Oddly enough if the appraisal comes in at MORE than the loan amount the underwriters get nervous and ask questions. So the appraiser will stop when they see a value of about $165,000.
I've had appraisers just drive by.
Appraised Value, Assessed Value and Market Value are three different things for three different uses and never are the same. Confusing? Yes but when you understand the uses it is clear.
Don't be concerned and don't listen to guesses here.
Good Luck.

Answer 6

Is the problem that the bank won't loan you enough money to buy the house, or are you just concerned that the value is less than you are paying? I wouldn't be concerned about $2K in value. You will probably make that up in a few years. If you can't come up with the difference that is required because of the first, then you have something to be concerned about.

In your contract, there should be a standard clause that states that you have the right to rescind the contract if you cannot get appropriate financing. This works two ways. First, it allows you to back out if you cannot get enough money. Second, it allows you to walk away if you don't get the terms you were looking for, provided they were outlined in the contract.

In the future, don't make an offer without protecting yourself. Also, do your homework. Make sure you know the value before making an offer. This is business.

Answer 7

Always remember this.
Everything is negotiable until the last T is crossed, and the last I is dotted! Unless there are extreme problems with the home you are trying to buy, chances are good the appraisal will be @ the same as the offer. They want the business, so they will bend if necessary. They will mortgage the cost of the home and it is the collatoral. If the listing agent did their job, the house is priced reasonably, and not drastically different than other home prices that have worked. The realtor should have qualified you ahead of time to see what price range you can look into. Did they do that.

Answer 8

If you are represented by a Realtor, the standard Offer to Purchase includes a contingency that says that the appraised value must meet or exceed the Offer amount or you have the right to cancel. No lending institution will provide more funding than necessary for the purchase, however, if this house absolutely talks to you and comes with a staff, you can always pay the difference between the loan amount and initially agreed upon Offer amount.

If this is a For Sale by Owner and you used other forms, and this contingency is not included and you want to back out, you may lose your earnest money deposit.

Answer 9

Many people pay for houses that are more than the established or appraised value if they are really in love with that particular house. Or it has some feature or features that really attract them to it. However, the downside is that the bank or mortgage company will base its mortgage on the appraised value and not what you are going to pay. Therefore, in all likelihood, you will; have to come up with the extra money necessary to purchase from what you thought was needed in the normal circumstances. Either that, or arrange a second mortgage provided you can carry it on a monthly basis. Sometimes, 2 mortgages are a real burden

Answer 10

have you ever been given a duplicate of the appraisal? If no longer, then get one ASAP. Appraisers use "comps" comparables interior the neighboring aspects to justify the appraisal. those "comps" sould evaluate properly on your place and transformations are generally made for any variations between the properties. in case you opt for help understanding how the appraiser arrived at his parent, ask for a proof. you may additionally look on the revenues interior the section with an area Realtor. value determinations are accomplished on truthfully "revenues", generally interior 6 months to a three hundred and sixty 5 days,.... no longer on properties that are presently on the industry.