That’s the million dollar question. And it happens more often than you might think. So what does happen when the house you are buying or selling doesn’t appraise at the price the buyer and seller agreed to?
Normally you would think the sale of the house would be canceled. But when the boom was upon us, this was happening all the time. You had bidding wars among buyers that would drive the house price up above the market value. The bank would only lend on the appraised value so the buyer would have to come up with the difference. And many buyers did! They brought an extra $5,000, $10,000, $15,000 or more to the closing table to make up the difference between the sales price and the appraised price. It was acceptable to do this by many because everyone thought they were getting a great deal and that home prices would keep rising.
Well today you very rarely find a buyer that will bring extra money to closing to buy a home that didn’t appraise at the sales price. So there is your second “what happens” when the house doesn’t appraise. The buyer could bring more money to the table. The first was the deal would just be canceled.
The last “what happens” is that the seller could lower there selling price to the appraised value. Sometimes the seller can lose a few thousand to tens of thousands of dollars from what they thought they were going to pocket.
Sometimes the buyer and seller can agree to splitting the difference where the buyer will come up with some extra money and the seller will come down in price a little to make the sale happen. If they can’t agree to do this then the sale will most likely be canceled.
One other option is to change banks and have a new appraisal done by a different company. Sometimes different appraisers come up with different prices. Be aware that this may incur additional costs for the buyer.
If you have any questions about this topic, please feel free to contact me or any of our agents at anytime.