Like most homeowners, you’ve invested money, time, and love into your home, even blood, sweat, and tears. This beautiful place you have called home, whether for one year or thirty years, is special to you. Now that you’re ready to list, you expect buyers to appreciate your hard work and recognize your home’s value. Unfortunately, things don’t always happen that way. So, what should you do if your home doesn’t appraise for the selling price? Come along as we discover your options below!
What Is An Appraisal and How Can It Affect a Home’s Selling Price?
A home appraisal is an unbiased evaluation that determines a home’s value. Financial institutions use these assessments to ensure they do not lend too much money for home purchases. Appraisals almost always occur before a home sale.
Because an appraisal determines how much a lender will loan a home buyer, it can often affect a home’s selling price. For instance, if a home’s selling price is $300,000 but appraises for $270,000, the bank will not loan the entire $300,000.
This situation could leave the buyer $30,000 short, depending on their circumstances. If this happens, other arrangements may be made, which will be discussed in the next section.
What Can Happen If My Home Appraises For Less Than the Selling Price?
Now that we know what an appraisal is let’s look at what can happen if a home doesn’t appraise for selling price. We will consider our previous example of a $300,000 sales price and a $270,000 appraisal value. Here are a couple of options:
- The buyer can make up the difference with cash or find a way to borrow the extra funds. This situation is not ideal, and many buyers don’t have this option when purchasing a home.
- Next, you, the seller, could negotiate with the buyer and reduce the sales price. Your real estate expert can help you with this step, ensuring you get the best deal possible with your particular situation.
Quick note: Your Realtor® can help set your listing price, which can sometimes help avoid these unfortunate situations. They are skilled at understanding the local market and can price your home appropriately from the start, which can reduce disappointment down the road.
How Should I Handle “Lowball” Offers?
- Why is the offer lower than you expected? Depending on the market, it’s not uncommon to see offers 3-5% below the asking price.
- Refrain from dismissing the offer. Submitting a counteroffer, rather than ignoring a lowball offer, is often the smartest strategy.
Remember: It doesn’t matter where the buyer starts with their offer but where they end up. - Consider all the transaction terms – the price may not be the most critical factor for some sellers. As a seller, maybe you’re already under contract for your dream home, so you want to sell this home quickly. Perhaps you have other reasons for the transaction to move quickly, making negotiating a lower price worthwhile.
- Focus on your goal. When handling a lowball offer, it’s essential to remember that the ultimate goal is to sell your home. Negotiating might be wise if 20+ people have been through your house and you’ve received only one lowball offer.
- Rely on your Realtor®. It isn’t easy to be objective when it comes to your home. You’ve poured your heart and soul into these four walls. Because of the emotional connection, it’s vital to hire an expert Realtor®. They will be there through each step, going to bat for you when negotiating and ensuring your best interests are always at the forefront.
The Bottom Line
With the right mindset and an agent that is a skilled negotiator, a lowball offer or a home appraising for lower than the sales price can become a “win!” So, if your home doesn’t appraise for the selling price, don’t panic – you can still reach your home selling goal.
Are you considering selling your property and want to know what it may be worth? Begin by getting your complimentary home value report here. Even if you aren’t sure about listing your home yet, regularly checking your home’s value is essential. The information can be used to leverage equity or discuss lower tax options, depending on your unique situation.
Lastly, don’t forget to check out the Resources section of our website, featuring an informative video library, free downloads, and helpful links!