You’ve spent a few months searching countless Knoxville homes for sale. After finally find the perfect home, you write the winning offer in a multiple offer bidding war. Then, a few weeks later you find out the house didn’t appraise at the agreed upon price.
So, what’s a buyer to do in a situation where the house doesn’t appraise?
Don’t Freak Out
In a situation where a Knoxville home doesn’t appraise, the worst thing that any party can to in the transaction is freak out. Before you start to panic and make a rash decision, take a moment and take a breath.
Unfortunately, this situation can happen for a number of reasons, but most importantly it’s important to see here that this happens. And, more importantly, the situation is fixable if all parties are willing to work together.
Figure Out What Happens Next
In a situation where an appraisal comes in low, there are a few different options that can remedy the situation.
(1) Lower the sales price. The easiest way to remedy the situation is to lower the overall sales price. This may make some sellers squeamish, however, it’s important to remember that if this appraisal came in low, the next will likely do the same. So, it’s probably best to work it out with your current buyer and move on.
(2) If lowering the sales price isn’t an option, the buyer can make up for the difference in price with cash. Lender’s are only concerned about about the loan-to-value ratio, so if the buyer makes up the difference in price in cash, it doesn’t make a big difference.
(3) Another option is to get a second appraisal. If a buyer’s current lender will not allow this option, the buyer can switch lenders. Unfortunately, this can be a risky option because the buyer will be stuck paying for two different appraisals, which both could end up with the same result.
(4) All parties can walk away. A majority of real estate contracts have an appraisal contingency clause which allows any party to walk away from the transaction if the house doesn’t appraise.
How To Avoid A Low Appraisal
The best way to prevent another low appraisal is to know a few of the reasons why an appraisal is low in the first place. Low appraisals tend to happen for a few reasons including:
-Multiple offers that cause the price to be artificially inflated.
-Overpricing by the seller.
-Lots of shorts sales and foreclosures that cause the comparables to be lows.
-Lack of comparable homes due to lag from slowly rising home prices.
The best thing that can be done to prevent a low appraisal is to truly investigating what other Knoxville homes are selling for. As a buyer, your agent will also be able to provide you with some guidance when writing an offer.
Are you thinking about selling your Knoxville home this year? If you are interested in buying a home in Knoxville or in the greater Knoxville area, please do not hesitate to contact us. Rick can be contacted at 865-696-9002 or via email at [email protected]. Kati can be contacted at 865-392-5880 or via email at[email protected].
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