If you’re confused about the rules of lending and your home’s appraisal you’re not alone. Especially in this market! I have watched experienced home buyers and sellers get completely confused as well, so here’s the deal: let’s say you’ve made an offer on a house, the sellers have accepted your offer, your loan has been approved and the lender has ordered an appraisal (which, by the way, will cost you around $300-$500), the appraiser makes an appointment to see the sellers house, measure it and so on and for whatever reason the home is appraised for less than the price you and the seller agreed on.
At this point, and again, especially in this market, the lender is highly unlikely to loan you that amount to buy the house. So what you’ll need to do next is either ask the seller to place the agreed upon sales price at or below the appraisal figure, or come up with more cash of your own to fund the difference, or walk away from the deal. If your contract is set up properly, and the deadline for the appraisal hasn’t passed you should be able to reclaim your earnest money.
Unfortunately with today’s tight lending standards and lower market values it is not that uncommon for an appraisal to fail to meet the agreed upon price.
photo credit: Putneypics
