If you fall in love with your dream home, only to find out that it gets a low appraisal value, what do you do? There are steps you can take, and as your Houston real estate team, we will fill you in on these. But first, it’s important to understand why the appraisal is low.
Here are some common reasons for a low appraisal:
- The analysis is skewed. Appraisers will compare your home to what similar homes in the area sold for. But if a home or two sold for lower prices than they should have, that could skew the results. Or, if there aren’t homes in your area that sold recently, they might look at what homes sold for in surrounding neighborhoods with different values. Do your homework!
- Upgraded features don’t help. The seller might expect their finished basement to up the value, because of all that added square footage, but appraisers are required to use a lower value per square foot for space below ground. High-end extras, such as pools, tennis courts and lavish landscaping aren’t appraised for much more than homes without them.
- The market is hot! Appraisers typically look at what homes in the area sold for up to six months ago. Since the Houston real estate market is hot, what homes sold for six months ago might not reflect what homes are selling for right now! Prices keep going up, and it’s hard to keep up with.
- You won a bidding war. When the market is hot, and inventory is low, buyers typically find themselves in the midst of a bidding war. If you win, you might agree on a price that is much higher than the appraised value of the home. In this instance, it’s up to you whether you are willing to pay the difference.
- The appraiser is inexperienced. This is always possible! During the hot spring market, an appraiser might rush the job or not take all the nuances of the local market into consideration. As your real estate team, we can point you in the direction of qualified appraisers in the area that we trust!
If an appraisal comes in lower than what you expected, there’s a few steps you can take:
1. Appeal the appraisal. This takes time and research/homework on your part, the appraiser’s and ours, to prove that the estimated value is not in congruence with other appraisals in the area.
2. Order a second appraisal from a different company and hope for the best. It will cost you, however, so keep that in mind when choosing a qualified company the first time!
3. Negotiate with the seller. If the appraisal is accurate, you might get the seller to budge a little on the agreed upon price.
4. Walk away. No buyer wants to have to do this after choosing a home to purchase, but it is still an option until the closing papers are signed.
When ready to accomplish your home-buying goals in the Houston real estate market, contact us, your reliable team! We are here to answer questions and to support you through every step of the process.