Home Appraisal Problem…
With a hot market in the area, this is happening more often than not. There is very low inventory in the area and a lot of buyers ready to purchase. This means that there are multiple offers getting put on the few available homes leading to higher selling prices. Buyers are taking advantage of the low inventory and selling their homes for more than what they are worth. When this happens the home appraisal comes back lower than what the offer that was accepted. Mortgage Companies wont pay more for a house than what it’s worth leaving the buyers in an uncomfortable situation.
Houses are selling days after being put on the market, and people are even swooping in with cash offers which can make it very intimidating and difficult to find an affordable house to begin with.
With competition this heavy, its absolutely essential for you to be pre-approved before you start looking. Sellers are more likely to accept your offer with a pre-approval than those without them. Having your proof of funding with your offer gives you an upper hand to those who don’t have it. It also shows you how much you can really afford, which can help you make smart decisions when negotiating the sale.
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So after you are pre-approved and you spend months searching for the home and you finally get an offer accepted! Yay! Then the appraisal comes through and its for less than what you offered.
So what happens now?
Well, you have a couple of options.
#1: Pay out the difference.
You have the option to pay the difference between the home appraisal and the offer you had accepted. Your mortgage company wont pay more than what the home is actually worth.
In an intense competitive market this may be the only way to get the house you put that offer on. But it could potentially lead to buyer’s remorse.
#2: Get a second opinion.
You could have another home appraisal done to potentially deem the house worth more than the first home appraisal. If it happens to come back as worth more than the first appraisal then you will have more options on what to do next. Here is a list of Washington Licensed Appraisers and Idaho Licensed Appraisers.
#3: Negotiate with the Seller.
Since you are already in a deal, the Seller is most likely as excited to get through this process as you are. They may be willing to negotiate on the price in order to get everything finalized and move on. However, if the market is really hot, they may take the risk of putting it back on the market to get someone to pay the price they are asking for. Keep an eye on the house though. There could be other offers after yours that fall through and the seller might end up lowering the price after all, giving you back a second opportunity at a more fair price.
#4: Move on
It might just not be meant to be. You most likely wont feel comfortable paying more for a house than what it’s worth. The excitement of getting your offer accepted will wear off and you could regret your purchase. Buying a house can be stressful and take longer than you would like it, but its one of the largest purchases a person could make and you shouldn’t purchase off of emotion.
Buying a home can be a long process. You might not find one that you love right away and you might loose the one that you fall in love with. There will always be more houses, its worth it to be patient and find a house that suits your needs as well as your budget than to potentially over pay on a house out of anticipation to be finished with the search.