Low Appraisal Solutions For Home Buyers And Sellers
This BLOG On Low Appraisal Solutions For Home Buyers And Sellers Was UPDATED On February 7th, 2019
A home appraisal is mandatory during the mortgage process. All lenders require a home appraisal during the mortgage process. There are various Low Appraisal Solutions For Home Buyers And Sellers in the event of a low home appraisal.
- There are conventional appraisals and FHA appraisals
- FHA appraisals are slightly more detailed than conventional appraisals
- FHA Appraisals may cost a little more than conventional appraisals
- FHA appraisals really stress on safety and security of the subject property
For example, the following will be issues with FHA Home Appraisals:
- loose wiring
- broken glass in windows/doors
- peeling paint
- non-functioning electrical
- plumbing issues
- non-working appliances
- non-working garage doors
In this article, we will cover and discuss when homebuyers get a lower appraisal than the home purchase price.
Common Issues With An FHA Home Appraisal
If the FHA appraisal notes defective items on the FHA appraisal, it does not mean that the home buyer cannot purchase the property:
- The appraiser needs to come back after the items have been fixed
- The sellers can correct the issue noted by the FHA appraisal
- An appraisal re-inspection needs to be done
- There is normally a cost involved with an appraisal re-inspection
- Appraisal Re-Inspections costs around $100.00
- Conventional appraisals can also have issues
- If there are major maintenance issues with the subject property or the property is not up to standards, the conventional appraiser will note it on the appraisal and the sellers need to correct the issue
- An appraisal re-inspection needs to be done also with conventional home appraisals
- The punch list requested by appraisers are normally minor
- Can easily be corrected by the sellers or sometimes the buyers with the sellers’ permission
- However, a low appraisal can be a problem
- But there are Low Appraisal Solutions For Home Buyers And Sellers
- However, in cases of low home appraisals, there are Low Appraisal Solutions For Home Buyers And Sellers
Most of the time it gets worked out between the buyers and the sellers of the subject property.
Low Appraisal Solutions Is Lowering Sales Price
In cases where the appraisal comes in a few thousand short and the seller is in a hurry to sell and close the deal, the seller normally lowers the sales price to the appraised value of the property.
- An addendum to the original contract needs to be completed with the new lowered purchase price and submitted to the mortgage lender
However, if the sellers do not feel that the appraisal is justified and the home buyers still want the house, an appraisal rebuttal can be requested.
Appraisal Rebuttal As Low Appraisal Solutions
Appraisal rebuttals can be requested if the sellers really feel that the low appraisal has no merit and the home buyers still want to purchase the home at the original purchase contract price.
- Appraisal rebuttals are somewhat difficult and normally takes about a week’s time
- The appraisal rebuttal form needs to be completed by the seller’s agent normally
- The seller’s real estate agent should provide five comparable sales to the subject property
- Can make comments on why the low appraisal is not justified
- Request the appraiser should review the supporting comparable sales
- Comparable properties cannot be listed properties that are not closed
- It cannot be properties that are more than a one-mile square area
- Comparable properties should be properties that have closed and recorded in the past six months
- Properties that closed longer than six months can be listed but will have less weight
- If the appraiser sees that the supporting comparable sales on the appraisal rebuttal form is justified, he or she may change the value of the low appraisal
Again, to get the value of the low appraisal changed to a higher value, it is not easy and supporting facts are required.
Other Solutions For Low Appraisal
Most home buyers get a seller’s concession towards a buyers closing costs.
- FHA allows up to a 6% sellers concession towards a buyers closing costs
- Conventional loans allow up to 3% sellers concessions towards a buyers closing costs
- In cases of a low appraisal on the subject purchase property, a compromise can be made with the home buyer giving up part or all of the sellers concession towards the buyers closing costs in lieu of lowering the sales price to meet the low appraisal
- For example, if a home buyer has a real estate purchase contract on a property for $106,000 with a $6,000 sellers concession towards a buyers closing cost and got a low appraisal of $100,000, the home buyer can give up the $6,000 closing costs sellers concession
- Still, go ahead with the purchase transaction and purchase the property at $100,000
- The home buyers will be responsible to cough up the closing costs
- If the home buyers do not have enough money for the closing costs, they can request a lender’s credit towards closing costs by the lender in lieu of higher mortgage rate
- On the same case scenario, the home buyer can still purchase the subject property at the $106,000 original purchase price
- But the lender will base the acquisition cost at $100,000 and base the mortgage loan on the low appraisal value of $100,000
- The home buyer needs to come up with the additional $6,000
Qualifying For Mortgage With Lender With No Lender Overlays
Borrowers with less than perfect credit and higher debt to income ratios who need to qualify for a mortgage with a direct lender with no overlays can contact us at The Gustan Cho Team at 262-716-8151 or text us for faster response. Or email us at email@example.com. Gustan Cho Associates has no overlays on FHA, VA, USDA, and Conventional Loans.