Do Appraisals Come In Low Often? How to Combat Low Appraisals

When it comes to selling your house, the appraisal can often feel like a wildcard in the process. While low home appraisals don’t happen as frequently as most people think, they can be a hurdle when trying to get the best possible cash offer for your home. In the upcoming sections, we’ll dispel some common misconceptions about appraisals, identify signs of a potentially low appraisal, and offer practical advice on how to navigate through this situation from a home seller’s perspective. By understanding these dynamics, you’ll be better equipped to maximize the selling price of your home and make the process smoother and more predictable.

How Often Do Appraisals Come in Low

Despite popular belief, it’s not as common for appraisals to come in low as one might expect. According to a report by the National Association of Realtors (NAR), only about 10% of all real estate appraisals come in below the contract price. That means, in 90% of cases, the appraised value equals or exceeds the price agreed upon by the buyer and seller. However, it’s important to understand that these percentages can fluctuate based on several factors: the locality, market conditions, and the type of housing. It’s always wise to remember that while the odds are in your favor, a low appraisal can still occur and when it does, it’s crucial to be prepared and informed on how to handle it.

How Often Do Appraisals Come in Low

The Importance of Avoiding Low Appraisals

Avoiding low appraisals is critical in the home-selling process for a plethora of reasons. First and foremost, a higher appraisal value translates to a higher selling price, enabling you to maximize your return on investment. Secondly, low appraisals can deter potential buyers who rely on financing options. Lenders often grant loans based on the appraised value, not the agreed-upon price between the buyer and seller. If an appraisal comes in low, the lender might reduce the loan amount, which can complicate the transaction or even lead to deal breakups. Finally, low appraisals can extend the selling process, causing unnecessary delays and additional costs. 

This is particularly true if re-appraisals or disputes over the appraised value become necessary. Hence, understanding the appraisal process, recognizing its importance, and taking proactive measures to present your home in the best light can be invaluable in avoiding low appraisals and facilitating a smoother selling process.

>> Check out this home seller’s inspection checklist!

What Causes Low Appraisals

Several factors can lead to low appraisals, and being aware of these can help you mitigate potential risks. Among these factors are market conditions, comparable sales in the neighborhood, and the overall condition of your property. In the next section, we will delve into these causes in detail, exploring how each can influence your home’s appraisal value and what steps you can take to ensure a fair evaluation. By being proactive and knowledgeable about these factors, you can work towards steering clear of low appraisals and securing the best price for your home.

Lack of Recent Comps

A lack of recent comparable sales, often referred to as “comps,” is one significant factor that may lead to a low appraisal. Comps are recently sold properties similar to yours in terms of size, location, condition, and features. Appraisers use these comps to determine your home’s market value. If there are no recent comps, or if the comps available are of properties that sold for lower prices, it can negatively impact the appraised value of your home. This is particularly true in fast-paced real estate markets where prices might be rapidly increasing, but recent sales data do not reflect these trends yet.

To combat this, as a seller, you can provide your appraiser with a list of recent comps that you or your real estate agent have found. Highlight any property features or circumstances (like if a sale was a distress sale) that might make your home more valuable. Understanding the impact of comps on your home’s appraisal and actively participating in the process can help you secure a fair evaluation and, consequently, a higher selling price.

Changing Market Conditions

Another factor contributing to low appraisals is changing market conditions. The real estate market is dynamic and can fluctuate based on a variety of elements such as economic indicators, interest rates, and consumer sentiment. For instance, in a housing market boom, prices can rise faster than the appraisals can keep up with, leading to lower appraisal values. Conversely, in a downturn, an overabundance of distressed sales can pull down appraisals.

Real estate appraisers generally rely on past data for their evaluations, usually from the previous 3-6 months. If the market has recently turned upward, but the available data still reflect a prior period of stagnation or decline, it could undervalue your home. This is why it’s crucial to keep an eye on macroeconomic conditions and trends in your local real estate market.

If you believe that the appraisal didn’t account for recent positive market changes, provide supporting evidence. This could be reports or articles about the local housing market, or even listing prices of similar homes in your area (though these aren’t as influential as sale prices). Knowing the market and providing the appraiser with up-to-date, local market information can help you contest a low appraisal and ensure your home’s value is accurately reflected.

Home Appearance

The condition and appearance of your home significantly impact its appraised value. Despite appraisals being largely based on hard data like square footage and the number of rooms, the appraiser’s subjective impressions of your home can also influence the appraisal. A home that looks well-maintained, clean, and attractive is likely to receive a higher appraisal than a similar home that appears neglected or unkempt.

Crucial elements that appraisers pay attention to include curb appeal, cleanliness, updates, and renovations, and the condition of fixtures and appliances. Curb appeal refers to how appealing your home looks from the street. A neat lawn, well-maintained facade, and attractive landscaping can positively impress an appraiser. Inside the home, cleanliness matters. A clean, clutter-free home gives the impression of a well-cared-for property. Additionally, recent updates and renovations, especially to high-value areas like the kitchen or bathroom, can increase your home’s appraised value.

Conversely, obvious issues like broken fixtures, peeling paint, stained carpets, or a leaky roof can cause the appraised value to plummet. These visible problems could lead the appraiser to conclude that there may be hidden issues as well, further lowering the appraisal.

As a seller, it’s in your best interest to ensure your home is in the best possible condition for appraisal. Consider investing in minor renovations, fixing visible issues, and deep cleaning your home to present it in the most favorable light. Remember, the goal is to make a positive impression on the appraiser, convincing them that your home is worth as much as possible.

How Often Do Home Appraisals Come in Low

While it can be alarming to consider, it’s important to note that low home appraisals are not as common as you might think. According to various industry reports, only about 10-20% of home appraisals come in lower than the selling price. It’s more likely to occur in heated markets where bidding wars can inflate the price, or in unique situations where there are few comparable properties. However, even within this small percentage, a low appraisal does not necessarily mean the deal will fall through. Sellers and buyers have the option to negotiate in light of the new appraisal, ensuring the selling process can continue smoothly. Despite the relative rarity of low appraisals, it’s still essential to understand how they occur and how to navigate one, should it arise.

What to Do If an Appraisal Comes in Low

If you find yourself in a situation where your home’s appraisal comes in low, don’t panic. There are several courses of action you can consider to navigate this scenario effectively.

  1. Challenge the Appraisal: If you feel the appraisal is inaccurate, you have the option to challenge it. Gather evidence supporting your claim of a higher property value, such as recent comps, information about neighborhood improvements or amenities not considered by the appraiser, or evidence of errors in the appraisal report. Submit your findings to your lender, who can request a reconsideration of value from the appraiser.
  2. Negotiate with the Buyer: You can negotiate with your buyer to salvage the deal. This might involve lowering your asking price to align with the appraised value, or meeting the buyer halfway if they’re willing to pay some amount above the appraised value but below your asking price. The buyer may also be able to increase their down payment to bridge the gap.
  3. Apply for a Second Appraisal: If you are unhappy with the first appraisal, consult with your real estate agent and consider getting a second opinion from another appraiser.
  4. Sell to a ‘We Buy Houses’ Company: Alternatively, you can sidestep the traditional home selling process and sell your property to a ‘We Buy Houses in Buffalo‘ company. These companies, also known as cash buyers, can make an offer on your home regardless of its appraised value. This can be particularly appealing if you need to sell quickly or if your home has significant issues that are impacting its appraisal. However, keep in mind that these companies generally offer less than market value, as they typically plan to invest in renovations and resell the property. But if that means you don’t have to deal with repairs and updates to boost your home’s value, it can be a viable option.

Remember that a low appraisal doesn’t mean your home-selling journey is over. Stay informed, consider your options, and choose the path that aligns best with your goals and circumstances.

What to Do If an Appraisal Comes in Low

Conclusion

In conclusion, low appraisals are not as common as you might think, but they can happen. As a seller, understanding how to navigate a low appraisal is crucial to ensure you get the best cash offer for your home. It’s essential to keep an eye on macroeconomic conditions and trends in your local real estate market, as well as maintain your home’s appearance and condition to make a positive impression on the appraiser. If you do encounter a low appraisal, remember that there are options available to challenge or negotiate it, or even sell your home to a ‘We Buy Houses in Albany’ company. With knowledge and preparation, you can handle a low appraisal with confidence and continue toward a successful home-selling journey.

If you need to sell your house fast and worry about a low appraisal, we can help! We’re Leave The Key Homebuyers, and we buy houses in New York. We’ll make you a cash offer for your home as-is, regardless of its condition or appraised value. Contact us today for more information!

How Often Do Appraisals Come In Low? | Leave The Key