It can be scary to buy a home, especially in competition when emotions run high. 

Many buyers are concerned they are "overpaying" for a home, because of the competitive atmosphere, and the consistent lack of supply that is driving demand in our market. 

After an offer is accepted, if a buyer is obtaining financing, the lender wants to conduct an appraisal to ensure the home is worth what you're paying for it. 

But what happens if it comes in low, does that mean you are making a bad / irresponsible decision? 

Usually not! I want to encourage you about a few things:

1. Fewer than 10% of appraisals come in low, in fact about 60% come in ABOVE the contract price (sometimes that's just rounding up, but still!)

2. Appraisers are humans too with their own biases and opinions. You can have 10 appraisers view a home and receive probably 6-8 different values.

3. Appraisers do receive ~2 years and hundreds of hours of training and apprenticeship time to earn their license, so they are quite educated on the subject. 

That being said, a home is ultimately worth what you are willing to pay for it, so long as you can responsibly purchase it, hopefully sell it for more than you bought it for, and easily finance it, if needed.

So, what happens if an appraisal does come in low?



1. We first must attempt a "Reconsideration of Value" or ROV. Each lender has their own guidelines about the process and requirements but they're quite similar across the board:

a. provide better comparable sales than the appraiser used in the original report.

b. provide objective data to contest the numbers and results in the first appraisal. (example: The subject property was significantly renovated, and the comparable sales 2-4 are quite outdated. As a result, the subject should be worth $50,000 more than comps 2-4 on the basis of the renovations. The appraiser only gave a $15,000 value, which does not reflect how the market would value such upgrades).

2. If the first appraiser responds within 48 hours and increases the value to where we need it, or close enough, then YAY! We smile, celebrate and move on. 

3. If they do not respond at all (this happens too) or if they disagree with our data, then we can attempt to "flaw" the appraisal. This means we determine the first appraisal is factually incorrect, and does not properly reflect the subject property value. This is most often approved, but not always. The comps, data and argument needs to be compelling and persuasive. The "flaw" process goes through our highest underwriting department, Credit Risk Oversight, who are seasoned 20+ yrs experienced underwriters who determine the exceptional credit decisions like this. 

4. If approved, we would then order a new appraisal. (we have done this 4-5 times over the last 7 years, and each time, we were able to close the loan with an appraisal at value!). Great track record of success on this. 

Questions on this, reach out by call or text at 414-488-0438!