So, you’ve received the appraisal report and it came in “light.” Don’t panic! As a buyer, there are several options and potential next steps for you to consider. Let’s explore what you can do when faced with a low appraisal.
Dealing With Low Home Appraisals
When a real estate appraisal comes in “light,” it means the appraised value falls short of the agreed-upon purchase price. This can have significant consequences for both buyers and sellers alike as when an appraisal comes in lower than expected, it can throw a wrench into the entire transaction process.
A low appraisal occurs when the assessment of a property’s value is lower than what was initially agreed upon. This evaluation discrepancy can lead to renegotiations, delays, or even cancelled deals. For families looking to buy or sell their homes, understanding how low appraisals impact real estate transactions is crucial. So, buckle up as we navigate through the challenges and potential solutions when an appraisal comes in “light”.
Factors Leading To Low Appraisal Values
Several factors contribute to low appraisal values, thus impacting the market value of a property. Here are some common causes:
The GTA real estate market has undergone many fluctuations since the pandemic. The ever-changing nature of the real estate market can significantly affect property values. If there’s a downturn in the market or an oversupply of similar properties, it can lead to lower appraised values.
Inadequate Property Maintenance:
A poorly maintained property may receive a lower appraisal due to its overall condition. Issues such as outdated fixtures, structural problems, or neglecting necessary repairs can negatively impact the appraiser’s assessment.
Appraisers rely on comparable sales data to determine a property’s value. If inaccurate or insufficient comparables are used, it can result in an undervaluation of the property being appraised.
Unusual features or characteristics of the property that deviate from standard norms may pose challenges during the appraisal process. These unique aspects might make it difficult to find suitable comparables, leading to lower appraised values.
Buyer’s Perspective: What To Do When An Appraisal Falls Short
Negotiate With The Seller
As a buyer, one option for you is to negotiate with the seller based on the appraised value. You can request that the purchase price be lowered to match the appraised value, so to avoid overpaying for the house. This approach allows you to bridge the gap between what you initially agreed to pay and what the appraisal report suggests.
Bring Additional Funds
If negotiating doesn’t yield satisfactory results, another option is to bring additional funds to cover the difference between the appraised value and purchase price. By doing so, you can proceed with the transaction without renegotiating or risking termination of the contract.
Terminate The Contract Or Request A Second Appraisal
In some cases, negotiations may fail, or bringing additional funds might not be feasible. In such situations, as a buyer, you have certain rights. You can choose to terminate the contract if it includes an appraisal contingency clause. Alternatively, you may request a second appraisal if you believe there were errors in the initial assessment.
Remember, each situation is unique, and what works for one buyer may not work for another. It’s crucial to assess your options carefully and consult with professionals such as your real estate agent or attorney before making any decisions. Contact our team for more information if you need any advice. We are always here to help! Call us at 647-691-7778.