Are you thinking about selling your house fast in Oceanside, California? Well, one thing that can hinder your home sale is an appraisal that comes in lower than market value. Since the appraisal is a significant part of the closing process, that can delay a real estate deal or cause it to fall through entirely. Here is more on what an appraisal is and what may happen if you get an undervalued house appraisal.
What Is An Appraisal?
An appraisal is a valuation of your home, typically performed by a licensed appraiser. They may gather much of their information on your home from comps as a real estate agent does. What this means is they will look at other homes in the area similar in size, age, and location to your home and determine the price of your home. In addition to comps, they also inspect the bones of your home by looking at its condition. They may also look at tax records on the property.
After considering all of the information they’ve gathered, the appraiser will complete a standard appraisal report. This contains information about how much your property is worth according to their findings.
What Does It Mean When You Get A Low Appraisal Value?
A low appraisal value doesn’t always immediately kill a deal. What happens if a house appraises for less than expected? Here is what may happen.
Challenge the Appraisal Results
The appraisal is only as good as the information the appraiser can access. So, if there are very few comps and not enough hard evidence they can rely on, the appraisal results may be lower than anticipated. In such cases, you or the buyer may want to challenge the results and get another appraisal.
Buyer May Choose Another Lender and Get Another Appraisal
Another option is for the buyer to get another appraisal but with another lender entirely. The appraiser hired by the current lender may not have access to resources that another lender has. So, requesting another lender may change the results of the appraisal.
Hope the Buyer Absorbs the Additional Costs
If another appraiser performs a valuation on your house and gets the same or similar results, chances are, the results are correct. The lender will only provide what the home is worth. However, if a buyer sees the home as valuable to them, they may absorb the costs by paying out of pocket for the additional amount not covered by the lender.
You Can Make Repairs to the Home
Perhaps your particular appraisal came in low because your house needs repairs. If you fix the repairs, this could increase the home’s value, making it appraise higher. Some typical repairs required to improve appraisal value include the following:
- Roof repairs
- Unsafe handrails
- Paint issues
- Electrical problems
- Issues with HVAC
If you determine that fixing these problems is worthwhile, investing the money to improve them is a good idea. Otherwise, the low appraisal may kill the deal.
Buyer Walks Away From the Deal
One real possibility you will have to be ready for is that a buyer may simply walk away from the deal if the home appraises lower than market value. Although this may be disheartening, especially if you need to sell quickly, you will likely have to start the process again with new buyers.
Could You Be A Victim Of Appraisal Bias?
Despite every effort to keep housing discrimination out of the real estate industry, it still occurs. According to a recent report by Property Appraisal and Valuation Equity (PAVE), majority-minority neighborhoods still face appraisal discrimination. If you feel your low appraisal may have been due to bias, you can file a complaint with the federal government.
A low home appraisal may not end the real estate deal. Your home could still sell despite a low home appraisal. If a low appraisal happens, try to do all you can to protect the deal and see it through to closing. But remember that it is ultimately up to the buyer and their lender whether they want to proceed with the deal.