📖 READER VIEW (Read-Only, Public Access)
The appraisal came in significantly lower than our offer price. Our lender won't finance the difference, and we don't have the extra cash to cover it. We might lose our earnest money.
AI Analysis Summary
The appraisal value is significantly lower than the agreed-upon offer price, and the buyer cannot cover the difference, jeopardizing the deal and their earnest money deposit.
Problems
Questions
5 questionsWhat is the exact difference between your offer price and the appraised value? (ID: 1994)
Our offer price was $450,000, and the appraised value came in at $420,000. This means there's a difference of $30,000 between what we agreed to pay and what the lender is willing to finance based on the appraisal. Since our lender will only finance 80% of the appraised value, they are willing to lend us $336,000 ($420,000 * 0.80). We had planned to put down 20% of the offer price, which would have been $90,000, bringing our total to $426,000. Now, with the lower appraisal, we'd need to come up with an additional $14,000 in cash to cover the difference between our original down payment and the new required down payment based on the appraisal ($420,000 * 0.20 = $84,000, so our original $90,000 down payment is actually more than enough for the down payment portion, but the loan amount is the issue). The real problem is that the loan amount they are offering ($336,000) plus our original down payment ($90,000) only gets us to $426,000, leaving us $24,000 short of our $450,000 offer price. We don't have that extra $24,000 readily available.
What is the loan-to-value (LTV) ratio required by your lender for this loan? (ID: 1995)
The lender requires a Loan-to-Value (LTV) ratio of no more than 80% for this particular conventional loan. This means the loan amount cannot exceed 80% of the appraised value. Since the appraisal came in lower, our loan amount is now being calculated based on that lower figure, which is creating the shortfall.
Have you reviewed the appraisal report for any potential errors or omissions? (ID: 1996)
We've looked through the appraisal report, and it's quite detailed. The appraiser did mention a few comparable sales (comps) that were used. One of them was a house that sold about six months ago, which seems a bit dated given the current market. Another comp was a house that had some significant renovations, which ours doesn't have. We're wondering if the appraiser adequately accounted for the condition of our property versus the comps, or if they missed any recent sales in the immediate neighborhood that might have been higher. We're considering asking our agent to reach out to the appraiser to clarify some of their reasoning, but we're not sure how much information they'll be willing to share.
What is the deadline for this contingency in your purchase agreement? (ID: 1997)
The deadline for our financing contingency is actually quite soon, unfortunately. It's set for next Friday, which gives us less than a week to figure this out. The closing date itself is about three weeks after that, so if we can't resolve the financing gap, we'll likely have to terminate the contract before the contingency expires to get our earnest money back.
Have you explored any options with your lender regarding the financing gap? (ID: 1998)
Yes, we've spoken with our loan officer extensively. They've been pretty firm. They explained that due to our specific loan program (a conventional loan with a certain down payment percentage), they can only lend up to 80% of the *appraised value*, not the purchase price. They said there's no flexibility on this, and they can't just 'stretch' the loan. We asked if we could bring more cash to closing to make up the difference, but the issue is that the loan itself is based on the lower appraisal, so even if we put more cash down, the loan amount they're willing to give us is capped by the appraisal. They also mentioned that reappraisal is an option, but it's costly and there's no guarantee it will come in higher, and we'd have to pay for it ourselves.
Identified Causes
4 causesOvervalued Offer Price
75%The offer price was set too high relative to the current market conditions or the property's actual condition, leading to an appraisal that reflects a more realistic valuation.
Lender's Strict LTV Requirements
60%The lender has a strict loan-to-value (LTV) ratio requirement that cannot be met with the current appraised value and the buyer's available down payment.
Appraisal Discrepancies
50%The appraisal may contain errors, such as incorrect comparable sales (comps), miscalculations, or overlooking key property features, resulting in an artificially low valuation.
Market Downturn or Specific Property Issues
40%The local real estate market may have experienced a recent downturn, or the property itself might have significant issues that were not fully accounted for during the offer process, leading to a lower appraisal.
Recommended Solutions
9 solutionsRenegotiate with Seller
🤖 AI Analysis
"The user's primary problem is the appraisal gap and the lender's inability to finance it. Renegotiating the purchase price with the seller to match the appraised value directly addresses this core issue. The user has already reviewed the appraisal and has concerns about the comps used, which provides a basis for such a negotiation."
Negotiate with Seller for Concessions
🤖 AI Analysis
"Asking the seller for concessions (like a credit) is a direct way to offset the appraisal gap without requiring the buyer to come up with more cash or renegotiating the price down. This is highly relevant as the user explicitly states they don't have the extra $24,000 readily available."
Request an Appraisal Reconsideration
🤖 AI Analysis
"The user has already expressed concerns about the appraisal report, specifically mentioning dated comps and potential misrepresentation of their property's condition compared to renovated comps. Requesting a reconsideration of value from the appraiser, especially if the buyer's agent can highlight these points, is a logical next step to try and increase the appraised value."
Order a Second Appraisal
🤖 AI Analysis
"Given the user's concerns about the appraisal's methodology (dated comps, comparison to renovated properties), ordering a second appraisal from a different appraiser is a strong option. This provides an independent valuation and could potentially yield a higher appraisal, resolving the financing issue. The user's agent is already considering reaching out to the current appraiser, which indicates an openness to challenging the appraisal."
Renegotiate with Seller Based on Condition
🤖 AI Analysis
"While the user hasn't explicitly mentioned property issues, their concern about the appraisal not adequately accounting for their property's condition versus renovated comps suggests there might be grounds to renegotiate based on condition. If the appraisal report implies the property is in worse condition than the comps, this could be used as leverage."
Increase Down Payment
🤖 AI Analysis
"The user states they don't have the extra $24,000 readily available. However, if they *could* find a way to increase their down payment (even if it's difficult), it would directly reduce the loan amount needed and potentially bridge the gap. This is a less ideal solution given their stated financial limitation but remains a possibility."
Seek Additional Financing
🤖 AI Analysis
"The user explicitly states they don't have the extra $24,000 readily available. Seeking additional financing (personal loan, HELOC, family) is a way to acquire those funds. While not ideal, it's a direct solution to the cash shortfall if other options fail."
Explore Different Lenders
🤖 AI Analysis
"The user's lender is firm due to their specific loan program and LTV requirements. While exploring other lenders is generally good advice, the user's current lender's policy seems tied to the loan program itself (conventional with a certain down payment percentage), making it less likely that another lender with the same loan program would have significantly different LTV rules based on appraisal value. However, a different lender might have different appraisal review processes or loan products."
Re-evaluate Deal Feasibility
🤖 AI Analysis
"While re-evaluating deal feasibility is always important, the user is actively seeking solutions to *save* the deal, not necessarily to walk away. They are under a tight deadline and are exploring options to bridge the gap. This solution is more of a last resort or a parallel consideration rather than an immediate action plan to resolve the financing issue."
Authoritative Resources
How to Handle a Low Home Appraisal - NerdWallet
NerdWallet provides a detailed breakdown of how to navigate a low appraisal. It covers understanding the appraisal report, exploring options with the seller, and considering alternative financing if necessary, offering a financially focused perspective.
What to do if your home appraisal is lower than your offer | Rocket Mortgage
Rocket Mortgage, a major lender, offers a clear explanation of what happens when an appraisal comes in low and what options are available to the buyer. This resource is helpful for understanding the lender's perspective and the typical next steps in the mortgage process.
Low Appraisal - Reddit r/realestate
The r/realestate subreddit is a community where individuals discuss various real estate topics. Searching for 'low appraisal' will yield numerous threads where people share their experiences, ask for advice, and offer solutions to similar situations, providing real-world perspectives and community support.
What to do when your home appraisal comes in low - Bankrate
Bankrate provides a comprehensive guide on dealing with a low appraisal. It outlines common reasons for a low appraisal and actionable steps buyers can take, including renegotiating the price, bringing more cash to closing, or challenging the appraisal.
Appraisal Came in Low - What Now? | BiggerPockets
This blog post from BiggerPockets, a popular real estate investing forum, offers practical advice and strategies for homeowners and investors facing a low appraisal. It covers options like negotiating with the seller, getting a second appraisal, and understanding the appraisal process.