What home seller wouldn’t want to sell a house for more than the appraised value? While the extra money in your pocket may tempt you to list your house for more than the appraisal, take into consideration that a low appraisal can delay or even void a transaction.
A home appraisal is an official valuation of a property by a licensed appraiser who acts as an unbiased third party to the home sale transaction. The appraisal is typically ordered by a homebuyer’s lender as a part of the mortgage application process to ensure that the home is worth the value of the loan or more.
So long as the property appraises for the loan amount or more, it is considered adequate collateral for the loan. If the appraisal comes in low, however, the buyer may have trouble securing financing for their home purchase (more on this later).
The appraiser takes many factors into consideration during their appraisal, including the following aspects of the home:
You can sell a home for more than the appraised value — but it’s not ideal because it can cause financial problems for the buyer. Therefore, listing your house above the appraisal amount may significantly limit the number of potential buyers for your home. Your agent is best equipped to help you strategize how much above appraisal you should list your house for, if you should at all.
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The appraised value has an impact on the prospective buyer's mortgage, since the lender bases the home loan on the appraisal’s estimate of a home’s fair market value. Even when the buyer has agreed on a purchase price and the seller has accepted an offer, if the mortgage lender sees a lower appraisal amount, it could pull the loan.
More likely though, the bank will adjust the loan based on the loan-to-value (LTV) ratio, meaning the buyer will have to make up the difference in the appraised value and the purchase price if they want to buy the home.
Homebuyers with an appraisal contingency may choose to walk away from a home purchase if the appraisal comes in low without losing their earnest money deposit. This can be costly for home sellers who have to relist their home and start the process again from scratch.
Getting a pre-listing appraisal isn’t required, but it can be a good idea, especially for the following types of homeowners:
A pre-listing appraisal gives homeowners a clearer idea of the fair market value of their home, which can help them choose the right listing price. However, it’s important to note that appraisals are market dependent, and in extreme buyer’s or seller’s markets or a market in flux, home values can change significantly in a short period of time.
→ Learn more about pre-listing inspections
So, what can you do if the appraisal comes in below your expected sale price? You have a few avenues to still sell your home for more than the appraised value.
Maybe it goes without saying, but before you even go through the appraisal process, make sure you’ve done everything you can to get the best appraisal possible. Some good tips:
These are simple ways to help your home reach its maximum value in an appraisal.
In a seller’s market, you will likely have multiple offers. If you’re concerned about a low appraisal, don’t accept any offers with appraisal contingencies. Most buyers are willing to waive contingencies to make their offer more competitive, and it’s a good sign that they’re willing and able to meet a higher purchase price. But you can’t sell for more than the appraised value if the appraisal triggers a contingency.
One way to avoid an appraisal contingency is by selling to an all-cash buyer. Any buyer that doesn’t need a loan can skip an appraisal entirely. So, as a seller, if you’re fielding multiple offers but feel concerned about a difference between your sale price and an appraisal, going with an all-cash or higher cash offer could avoid the appraisal process.
Because homes are expensive purchases, you may not get an all-cash offer — but if you do, they’re worth consideration.
Sellers may dispute appraisals by submitting a reconsideration of value to your lender. This process brings in another appraiser to review the original valuation and ensure its accuracy.
Before you do this, though, review the original appraisal report with your real estate agent to confirm that the appraiser reported the correct square footage, number of bedrooms and bathrooms, and that they didn’t overlook any amenities or features of the home. Also verify that they used the most recent comparable home sales data available in the area. This will help ensure that the next appraisal doesn’t miss any value-adding features of your home.
A low appraisal doesn’t always mean the lender won’t approve the loan. The buyer will just have to bring more money to the table to meet new loan requirements. If you’re motivated to sell, you can bring the price down a little and still sell above the appraised value.
For example, let’s say you agreed to sell for $750,000 but the home was only appraised for $675,000. Bringing the purchase price down to $700,000 will likely satisfy both the buyer and their lender while ensuring you still come out ahead.
Despite a low appraisal, there’s a good chance you’ll find a buyer who is willing and able to meet your purchase price, or that you’ll get a better appraisal if you simply wait a few months.
You know what your timeline is, and how much you want to sell your house for. If you’re not in a rush, feel free to dig in your heels. Of course, you shouldn’t expect to sell a $650,000 appraised house for $1.5 million, but don’t be afraid to hold your ground until the right buyer comes along. Some buyers may balk and you might keep your home on the market a little longer than you expected, but if time is not a factor, patience could pay off.
In a seller’s market, it’s much easier to sell your home for more than the appraised value. There are more buyers looking for fewer homes, and some of them will come with all-cash offers that don’t require an appraisal. Depending on how motivated you are to sell, you can be picky about how much you sell your home for, even if home appraisers don’t love it as much as you do.
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