One of the most disappointing things when buying a home is when the appraisal turned out to be lower than the purchase price or the offer.
According to a post of real estate lawyer Gary M. Singer in SunSentinel.com, when applying for mortgage, the lender will greatly value the opinion of the appraiser and in such case would not usually reconsider the value in the event that the appraisal is less than the offer price. It should not be a problem if you have the right to cancel the sales contract and get back the deposit. You can also try to negotiate with the seller to adjust the price to match the appraisal and if the seller agrees to cooperate.
In cases where the seller is not willing to negotiate or worse the contract does not allow cancellation, it can be a great headache. So should cases like this be avoided? As the saying goes, prevention is better than cure so according to The Home Buying Institute, it is always a smart move to prepare in advance or have a contingency plan. This means that one should always consider that there is a chance the mortgage appraisal will become lower than expected.
With an appraisal contingency, you have the option to back out from the deal if the appraisal is low and the seller refuses to compromise. In this case, the standard clause that means the buyer can cancel the contract and reclaim any earnest money if the appraised value is less than the purchase or offer price.
When there are options, the most important thing here is knowing when to walk away. As what Singer has written in SunSentinel.com, "Is this the home you really want? And will you be able to recoup the extra investment when it comes time to resell?" These questions are just some of the things one should ask before taking further action after the appraisal turns out to be lower than what the seller is asking for.
