If you’ve found a buyer for your home and agreed on an offer, you may think it’s smooth sailing from there. But that’s not quite true. Click through to learn how a bad home appraisal can derail a sale.
You’ve found buyers for your home and accepted their purchase offer. Now comes an important next step: your home’s appraisal.
After you accept a purchase offer, the buyers’ lender will require that an appraiser come to your home and determine its value. If this appraisal comes in too low, your real estate deal might fall apart.
That’s because your buyers’ lender won’t want to lend them more money than what your home is worth.
Here’s an example: Say you and your buyers agree on a sales price of $225,000 for your home. The appraiser, though, says that your home is worth just $200,000. Your buyers’ lender won’t provide a loan higher than that amount.
What do you do if the appraisal comes in too low? You might have to lower your sales price to the appraised value, if you want to keep the deal alive. The challenge comes when the appraised value is lower than what you owe on your mortgage.
Say you owe $200,000 on your mortgage. If the appraiser determines your home is only worth $190,000, you might have to sell your home for that price and then pay your lender $10,000 to make up the difference in what you owe on your existing mortgage.
If you want to avoid this, you might have to hold onto your home until you pay off more of your mortgage or your property increases in value.