When the Home You’re Buying Doesn’t Appraise
When the Home You’re Buying Doesn’t Appraise
I am currently addressing this issue with some buyers. This is an unusually nice remodel and there were multiple bids on the property. We had to agree to the seller’s price to win the bid.
Now, there are absolutely no comps out there to support the price we had to pay. This dynamic is right out of the 2004-2005 playbook.
Here are some of the typical things that might occur when a home doesn’t appraise:
- The seller may request that you get a second appraisal
- The appraisal may be contested by the buyer by pointing out distinguishing upgrades and features that the comparable properties don’t have. In this instance the underwriter at the buyer’s lender may review the appraisal and make amendments.
- The buyer may ask the seller to reduce the sales price to the value that the appraisal came in at.
- The buyer may choose to pay the difference between sales price and appraised price in cash (which I never recommend).
- If all else fails, the buyer may back out of the deal.
There is currently a lack of inventory throughout San Diego, particularly in the ‘under $400K’ price range. I’ve encountered multiple offers on each home my clients have bid on. This can easily lead to a buyer paying too much for a given property.
I have no easy answers for this. Whether you decide to go down this road really depends upon how much you want a specific home. If you love it, go for it – if you don’t, I promise there will be others.
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