Low Home Appraisal – Now What?

low appraisal in Spokane

Let’s say you’re buying a home in Spokane and you’ve gotten to the point in the home buying process of applying for a mortgage loan. The lender orders an appraisal of the home, and unfortunately, it comes back lower than expected. What do you do with a low appraisal in Spokane? 

Or, what if you’re the seller in this situation? What can you do about a low appraisal on your end to ensure the sale still goes through?

This isn’t the end of the world, and you can overcome this stumbling block with the right information and help from an experienced Spokane Realtor. Below, we’ll go through several options for both home buyers and sellers in the event of a low home appraisal. First, though, we’ll go through what exactly a home appraisal is and some of the more common reasons appraisals come back low so you have a good base understanding of the situation. 

What exactly is a home appraisal?

A home appraisal is a professional appraiser’s unbiased opinion of the value of a home and goes along with a mortgage in the processes of buying or selling a home. 

What is an appraisal based on? 

An appraisal is based on a visual inspection of the home, information on recent sales of similar homes, current trends in the market, and amenities, and other aspects of the home. These can include factors like:

  • Square footage
  • Floor plan
  • Location (areas with low crime rates, highly-rated schools, nearby hospitals or police stations, walkable areas, well-maintained roads, etc, can positively affect an appraisal)
  • Structural materials and updates like updated electrical, a deeper basement, new roofing, new siding, solar panels, added insulation, and high-quality doors and windows can all positively affect an appraisal. 
  • Age of the home
  • The design style of home
  • Curb appeal
  • Number of bedrooms and bathrooms
  • Heating and air conditioning
  • Storage and garage space
  • Recent renovations
  • The state of the current real estate market
  • Recently sold comparable homes or comps

What is the purpose of an appraisal?

Appraisals are largely intended to protect the interests of mortgage lenders – if a borrower defaults on a mortgage, the lender can sell the home to recover the money it lent. So, an appraisal helps the lender make sure that the borrower isn’t borrowing more than the home is really worth. 

So, why would an appraisal come back low?

There are a variety of reasons a home appraisal might come back lower than expected. A low appraisal in Spokane obviously isn’t ideal, but they’re more common than you might think, and understanding the reasons why can help mitigate the disappointment. A few reasons include: 

  • Bidding wars: if the home you’re buying or selling is in a competitive housing market, the higher demand for the property can push the price past what the appraiser determines the home is worth. Appraisers are looking at factors beyond just the housing market, which will affect what value they assign to the home. 


  • Poor timing: Depending on your location, the time of year can affect your home appraisal. For example, early spring can be a common time for low appraisals in certain areas. As the weather gets nicer, potential buyers perk up, and all the new activity can lead to higher prices, but appraisers still have to look back at winter sales to justify current prices. 



  • Below-average appraiser: Appraisers are professionals, but they aren’t perfect. They may be new at their job or from a different area, and that can affect the accuracy of their appraisal. 



  • Lack of comps: In some cases, there haven’t been enough recent comparable sales for an appraiser to justify pricing, which can lead to a more conservative appraisal.


So as a buyer, what can you do after a low appraisal in Spokane?

Lenders will only provide a loan up to the appraised value of a home, which can be bad news for you as a buyer. There are a few things you can do in this situation. 

  • First, take a good look at the appraisal. As we mentioned earlier, appraisers can make mistakes. If you see any obvious errors in the appraisal, you should talk to your lender and see if there’s a way to get a second opinion or even make a new appraisal. 
  • Next, you can try asking for a lower price. The sellers are probably as invested in selling their home as you are in buying it, so the easiest solution for them could be to drop the price down to the value of the appraisal. If they won’t drop the price all the way down, they might still be willing to reduce it somewhat, and you can meet them in the middle. 
  • Finally, if the seller isn’t willing to adjust their price, you may have to decide if you can put together the extra money to cover the difference and offset the low appraisal. 

And, what can you do after a low appraisal in Spokane as a seller? 

If you’re selling a home, of course, your hope is to sell your home for what it’s worth. Getting a low appraisal can make that difficult, but there are several things you can still do: 

  • You can request a copy of an appraisal if you believe it might contain mistakes or misinformation. 
  • You can ask the buyer to challenge the appraisal with the hope of proving it inaccurate. An appraisal does come with a cost, but you can offer to split that price with the buyer as an offer of good faith and in an effort to keep the deal together. 
  • You can order your own appraisal. This isn’t always ideal because appraisals can take quite a bit of extra time and will cost you a good bit of money up front. If the new appraisal agrees with the first one, at least you know that the first one wasn’t necessarily in error, but you are still out the time and cost of the appraisal. If your appraisal comes in higher than the first, typically a lender will average the two and use that middle number.
  • Your buyer is motivated to make sure the sale goes through, too, so you can work with them to negotiate a new price. It’s up to you whether or not you’re willing to drop the price to the appraisal amount or meet the buyer somewhere in the middle. 
  • Another option is to offer seller financing if the buyer can’t come up with the difference in cost. You would essentially loan the buyer the money and take payments in regular installments down the road. (This gets tricky and is probably not the best option, but sometimes thinking outside the box turns up unexpected results)
  • Finally, if you’ve exhausted your other options, you have the option to terminate the contract and find a new buyer that isn’t as dependent on financing. Technically you (the Seller) can’t terminate the transaction, but if you don’t adjust the price and the Buyer is unwilling or unable to pay the difference in cash, they will be forced to terminate the contract. The earnest money, in this situation (and assuming nothing else has been agreed to in writing) is refunded to the Buyer. 

Hopefully, this article helps you understand the purpose of a home appraisal, why it might come in lower than expected, and what you can do about it as either a buyer or seller if it does. Don’t let a low appraisal stop you from selling – Contact us today

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