Friday, February 12, 2021 / by John Salkowski
Low appraisals are a product of our wild market; here’s how we handle them.
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Many buyers and sellers alike have been asking me the same question lately: “What if the appraisal doesn’t match my contract price?” This is an appropriate concern because the offers we’re receiving on our listings and submitting for our buyers are for $10,000, $20,000, and even $30,000 above asking price. Price escalation has become the reality of this current market, and as a consequence, we’re seeing more appraisal issues.
The challenge is to convince appraisers that these high contract prices are at value, and many are under-appraising properties—especially those that are in areas they’re unfamiliar with. Thankfully, we have options in the event of a low appraisal.
The first thing we do is make sure that there’s no human error at play in the appraisal. Generally speaking, appraisers are totally overwhelmed in this market. They are doing hundreds upon hundreds of appraisals every month, so it’s not unreasonable to suggest that they’re at a heightened risk of making mistakes.
After we verify that there were no errors in the appraisal, we can submit what’s called an appraisal rebuttal. Truth be told, trying to rebut a property’s appraised value is beyond challenging; I have not had success with it. In my opinion, some appraisers are operating with their egos first. They believe that their value is the value—no ifs, ands, or buts about it.
If the rebuttal is unsuccessful, then we can discuss the issue with our seller and/or buyer to see what they are willing to renegotiate. In order to land a property these days, buyers have to pay above asking price. It’s just the harsh reality of our market.
The best way to deal with a low appraisal is to take proactive measures. For example, as soon as all parties agree on a price, we want to put into writing that our buyer is willing to pay $15,000 above the appraised value should the appraisal come in lower than the contract price.
If you have further questions about how we handle low appraisals in this crazy market of ours, please feel free to reach out via phone or email. There’s never any cost or obligation to having a chat with me or any one of my awesome team members. I hope to hear from you soon!