Low Appraisal Solutions For Homebuyers and Sellers

This article will cover the low appraisal solutions homebuyers and sellers face.  This is why it is very important pricing a home. What good is it if the home is listed at a high price but does not appraise? Most homebuyers need to get a mortgage to purchase a home. The days of homes selling higher than the list price are long gone. In the following paragraphs, we will discuss low appraisal solutions even if a house does not appraise at the purchase price on the real estate purchase contract.

What If The Home Appraisal Comes in Low For The Homebuyer?

What are the low appraisal solutions for homebuyers and sellers during a hot housing market? Unfortunately, the booming housing market is creating a bidding war on homes listed. There is a major shortage of homes in the market versus homebuyers looking for homes.

Despite rates spiking in recent weeks, there is no shortage of demand for homes versus the inventory. The coronavirus pandemic and states still not reopening fully are not slowing homebuyers. The coronavirus pandemic has forced many employers to create remote job positions.

Should You Buy a House With a Low Home Appraisal?

Getting a low appraisal is one way to get out of the home purchase contract. Buying a house with a low appraisal is up to the homebuyer. How bad do you want the house? Remote workers can purchase homes in any state they like. They are no longer confined to commuting distance to a brick-and-mortar location.

Many homebuyers are looking for a home office and a larger yard. The demand for homes in the suburbs creates a significant demand for homebuyers and insufficient inventory.

Buying a home over the list price is becoming the norm. In this article, we will discuss and cover low appraisal solutions for home buyers. There is no doubt that it is a seller’s housing market.

The Home Appraisal Process For Homebuyers

A home appraisal is mandatory during the mortgage process. All lenders require a home appraisal during the mortgage process. There are various Low Appraisal Solutions For Homebuyers And Sellers in the event of a low home appraisal. There are conventional appraisals and FHA appraisals.

FHA appraisals are slightly more detailed than conventional appraisals. FHA Appraisals may cost a little more than conventional appraisals.

FHA Versus Conventional Loan Home Appraisals

FHA appraisals stress on safety and security of the subject property. The home’s value is normally derived by comparing comparable sales nearby the subject property.

If the appraiser cannot find comparable sales similar to the subject property, the home will not appraise. This is often a problem when homebuyers purchase a home that is higher than the list price.

Condition of The Property

The condition of the subject property can affect the home inspection. The following will be issued with FHA Home Appraisals:

• loose wiring
• broken glass in windows/doors
• peeling paint
• non-functioning electrical
• HVAC
• plumbing issues
• non-working appliances
• non-working garage doors

Common Issues With An FHA Home Appraisal

If the FHA appraisal notes defective items on the FHA appraisal, it does not mean that the home buyer cannot purchase the property. The appraiser needs to come back after the items have been fixed. The sellers can correct the issue noted by the FHA appraisal. An appraisal re-inspection needs to be done.

There is normally a cost involved with an appraisal re-inspection. Appraisal Re-Inspections cost around $100.00. Conventional appraisals can also have issues. If there are major maintenance issues with the subject property or the property is not up to standards, the conventional appraiser will note it on the appraisal, and the sellers need to correct the issue.

Can You Walk Away If The Home Appraisal Does Not Appraise at Purchase Price?

An appraisal re-inspection needs to be also done with conventional home appraisals. The punch list requested by appraisers is normally minor. It can easily be corrected by the sellers or sometimes the buyers with the sellers’ permission.

A low appraisal can be a problem. But there are Low Appraisal Solutions For Home Buyers And Sellers. There are Low Appraisal Solutions For Home Buyers And Sellers in low-home appraisals. Most of the time, it gets worked out between the buyers and the sellers of the subject property.

Low Appraisal Solutions Is Lowering Sales Price

In cases where the appraisal comes in a few thousand short and the seller is in a hurry to sell and close the deal, the seller normally lowers the sales price to the appraised value of the property. Sellers will not lower the sales prices on a low-appraised home if there are multiple property offers.

An addendum to the original contract must be completed with the new lowered purchase price and submitted to the mortgage lender. If the sellers do not feel that the appraisal is justified and the home buyers still want the house, an appraisal rebuttal can be requested.

Appraisal Rebuttal As Low Appraisal Solutions

Appraisal rebuttals can be requested if the sellers feel the low appraisal has no merit and the home buyers still want to purchase the home at the original purchase contract price. Appraisal rebuttals are somewhat difficult and normally take about a week’s time. The appraisal rebuttal form needs to be completed by the seller’s agent normally.

The seller’s real estate agent should provide five comparable sales to the subject property. Can make comments on why the low appraisal is not justified. Request the appraiser should review the supporting comparable sales. Comparable properties cannot be listed as properties that are not closed.  It cannot be properties that are more than a one-mile square area.

Does Appraisal Rebuttal Work as Low Appraisal Solutions?

Comparable properties should be properties that have closed and been recorded in the past six months. Properties that closed longer than six months can be listed but will have less weight.

If the appraiser sees that the supporting comparable sales on the appraisal rebuttal form are justified, he or she may change the value of the low appraisal. Again, changing the value of the low appraisal to a higher value is not easy, and supporting facts are required.

Other Solutions For Low Appraisal

Most home buyers get a seller’s concession towards buyers closing costs. HUD allows up to a 6% seller’s concession towards buyers closing costs on FHA loans. Conventional loans allow up to 3% seller concessions towards buyers closing costs on primary owner-occupant homes.

In cases of a low appraisal on the subject purchase property, a compromise can be made with the home buyer giving up part, or all of the seller’s concession towards the buyer closing costs instead of lowering the sales price to meet the low appraisal. For example, suppose a home buyer has a real estate purchase contract on a property for $106,000 with a $6,000 seller’s concession towards a buyer closing cost and gets a low appraisal of $100,000.

Forfeiting Seller Concessions and Getting Lender Credit For Closing Costs

One low appraisal solution is the home buyer can give up the $6,000 closing costs seller concession. Still, go ahead with the purchase transaction and purchase the property at $100,000. The home buyers will be responsible to cough up the closing costs.

Homebuyers can request lender credit if they need to give up the seller concessions for closing costs. Lender credit is when the mortgage lender gives you concessions for closing costs in place of a higher mortgage rate.

Lender Credit To Cover Closing Costs on Home Purchase

If the home buyers do not have enough money for the closing costs, they can request a lender’s credit towards closing costs by the lender instead of a higher mortgage rate. In the same case scenario, the home buyer can still purchase the subject property at the $106,000 original purchase price.

The lender will base the acquisition cost at $100,000 and base the mortgage loan on the low appraisal value of $100,000. The home buyer needs to come up with an additional $6,000.

Qualifying For Mortgage With Lender With No Lender Overlays

Borrowers with less-than-perfect credit and higher debt-to-income ratios who need to qualify for a mortgage with a direct lender with no overlays can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates has no overlays on FHA, VA, USDA, and Conventional loans.