Dealing with low appraisals

As we enter the transition period from a sellers’ market into a buyers’ market, sellers and their agents will still be trying to get the home prices that are higher because they are the last one to accept the news that the market has turned.    It’s during this time period that homes will encounter appraisal issues wherein the appraisal comes in lower than the purchase price.

When a low appraisal is encountered, you can handle it several ways.


The seller can reduce the price.  In my opinion, this is really the only option and course of action a buyer should take.  No one should pay over the value of a home.  You wouldn’t go into a store and pay more than what a product is priced at right?  Then why would you pay more for a home? Unless there is a goose laying gold eggs and it’s staying with the house, this should be the option a buyer should insists on and tries for first.


If option 1 isn’t available because seller is refusing to reduce the price and you still want the house, then the next course of action should be splitting the difference between buyer and seller.  Not all buyers have the cash available to split the difference in appraisal value vs purchase price.  If you are financing 95% of a sales price of $300,000 and the appraisal came in a $290,000 the lender will only finance 95% of $290,000 so you and seller can agree to split it but do not count on a lender financing your portion of the split because it will not happen.  The whole purpose of an appraisal is to make sure you are NOT overpaying for a home!  Appraisers rely on market conditions and they too know that the market is shifting.


If seller won’t lower price or split the difference and you still want the house, the only other option available to you is paying cash for the difference.  If you are one of the few buyers that have that kind of cash to utilize this option then good for you but make sure you will be staying in that home for at least 10 years!


Walk away.  If none of the above options work, then a buyer has the option to terminate the deal.  The appraisal is part of your financing/mortgage commitment contingency.  Stay on top of the mortgage contingency date so that you are protected in the event the appraisal comes in low.  Do not let your financing/mortgage contingency date come and go and then find out property didn’t appraise.  See Mortgage Contingency


If you are thinking of selling your home, you need to realize the market is transitioning.  Whether you think you know better or still want to push the pricing, when you are interviewing real estate agents, pay special attention to the comparables that agent has brought you.  Make sure they are like for like comparison (same house style, number of bedrooms, square footage, etc.)  As a seller it’s easy to think the market is still hot when you’re selling your own home but with more inventory coming on and sitting on the market, it’s more imperative now to price correctly to ensure you aren’t one of the languishing homes.  Also make sure, when interviewing agents, that the agents works with a lot of buyers because that means the agent is in touch with where the market is heading.  Agents who only list are definitely out of touch and tend to list homes too high.  Agents who work with only buyers, tend to under price a home.  You need an agent that has a good mix-up in their portfolio.


This is certainly the time you’ve been waiting on.  If you didn’t get a home during the insane bidding war and limited inventory, your patience will pay off.  Don’t low ball sellers (unless your agent has shown you comparables that warrant a low ball offer).  Just because the market is in a transition state does not mean home prices will plummet.  They will just level off and you can now negotiate vs multiple offer bidding wars.  So don’t bite your nose off to spite your face.  Ask your real estate agent for comparables and, again, make sure they are like for like!

The Balance
Avoiding A Low Appraisal

And, as always (here comes the plug to work with us:-) if you are looking to buy or sell, give the team at Key To The Dream Realty Group a chance and text or call us at 781 269 2195 or email us at

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We service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, Uxbridge, Blackstone, MA.  We service Bristol County, Massachusetts as well (Attleboro, North Attleboro, Easton, Norton, Mansfield, MA)  and  all of Rhode Island!  We have experts on Cape as well and in the City of Boston and surrounding towns.  We go where you need us to be because we know you want to work with truth-worthy, honest and hard-working real estate agents!  Have car – will travel 🙂


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