Buyer and seller agree to an appropriate sales price, $340,000 and the property goes into escrow. Two weeks later, the agent representing the buyer receives an email from the loan officer doing the loan for the buyer stating that unfortunately the appraisal done for the loan came in at $290,000.
What now….??? The seller is expecting the buyer to follow through and honor the contract, the buyer is confused because they are wondering how they could have paid more for the home than it’s apparently worth…. The agents aren’t happy, what now?
Unfortunately this is happening more and more often and buyers and sellers are forced to “re-negotiate” transactions well after the deal is sent to escrow. When this happens one of 3 things happens…. Either the seller agrees to reduce the sales price to the appraised value, the buyer agrees to come in with the additional money necessary to make up the short fall, or they meet somewhere in the middle.
There is no hard and fast rule what should happen in this situation…. each scenario is unique and requires that the parties and agents work together to keep the deal together. The low appraisal does not mean the deal is dead, what it does mean is that somebody needs to give in order to close the deal.
I have spent the last week working through several low appraisal scenarios, and expect that we will see more due to the fact there are still a fair amount of distressed sales happening in the market which when the market is at or close to bottom becomes a challenge for those sales that are starting to push the market north….My advice is to be patient and look at the transactions from all sides to determine the best compromise to keep it together.