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Thesa Chambers, Principal Broker

Contact Us Today At (541) 771-7064
thesa@centraloregonbuzz.com

70 SW Century Dr #110 Bend, OR 97702

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Disappointing Appraisal?

Disappointing Appraisal

You’ve found the perfect home at the perfect price and made an offer that the sellers accepted. But, the appraisal came back lower than your offer.

BUMMER!

What do you do now?

Any home financed through a bank or mortgage lender requires an appraisal to protect them against originating a loan is upside-down (the loan is greater than the collateral).

There are many reasons that an appraisal comes back lower than the home price. The comparable houses used in the appraisal may not actually apply to the property you’re hoping to buy. For example, if the home you’ve put an offer on is semi-rural or rural, the comparable homes may not have as much land, or may have land but not as much house, or fewer outbuildings. In residential neighborhoods, the home you wish to buy may have upgrades that none of its neighbors currently have. Often, there are no other recent sales in the same neighborhood to compare to, so the comparables are from other neighborhoods that may not have the same quality of life or amenities as the neighborhood you’re hoping to buy into. Sometimes, the home is subject to a bidding war that drives the price higher than its actual market or appraised value.

Traditional banks and mortgage lenders offer mortgages for a percentage of the appraised value, not the sales price or the offer you’ve made. If the appraisal is less than the agreed upon offer you may need to come up with more cash, but sometimes there are other options:

Get a second appraisal. Yes, you can ask for a second appraisal from another qualified appraiser. Of course, you’ll have to pay for it, but it’s a small price to pay for getting the house of your dreams. Just know that the lender doesn’t have to accept the second appraisal … it’s value may be in appealing the first appraisal.

Appeal the appraisal. On the other hand, you can appeal the appraisal with the original appraiser. Review the appraisal carefully. Sometimes things get missed. Sometimes the comparables don’t really compare. Sometimes the appraiser doesn’t have all the information. Give as much information to the appraiser as you can. In recent markets, short sales and foreclosures of similar properties might skew the comparable data too.

Review the appraisal contingency clause. A contingency clause means that if the appraisal comes in lower than expected, you can renegotiate with the seller. Of course, they are not obligated to use the appraised value, but they may be willing to cover closing costs or other expenses so that you make the purchase. Sometimes the real estate agent(s) will take a lower commission to compensate for the difference.

You can agree to pay the difference, but you are betting on the price of real estate increasing, so you really wouldn’t want to do this unless this is your absolute dream home.

The best way not to have a disappointing appraisal is to work with a real estate professional that knows the market well and can advise you of fair market values ahead of your making an offer.

Compliments of Virtual Results

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About Thesa

As your real estate agent, I understand the value of providing the best possible service to every buyer and seller. Listening carefully to fully identify not only your desires but also your needs. Then work diligently to ensure that both are accommodated to the best of my ability. We will stay abreast on changing market conditions, trends, developments and research all factors that could affect the purchase or sale of your property.  My success and your happiness greatly depend upon the quality of the relationship we achieve.  Through personal redefinition of the professional standards set by most agents, I hope set myself apart from the rest and become the first person that you think of for all of your real estate needs.

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Thesa Chambers, Principal Broker West + Main Homes
thesa@centraloregonbuzz.com
(541) 771-7064
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The data relating to real estate for sale on this website comes in part from the MLS. Listing broker has attempted to offer accurate data, but is not guaranteed accurate. All information presented is deemed reliable but not guaranteed.

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