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Ask an Expert: A buyer's options when the appraisal is too low

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Q. What are your options if the appraisal comes in too low when you’re in contract to buy an apartment? I can’t get the mortgage I need and the seller won’t budge on the price.  Should I ask for a new appraisal?

 A.  Many banks won’t revisit their appraisal findings, say our experts, but if you’ve got evidence showing that the appraisal is out of touch with reality, you should certainly try asking the bank to review the appraisal and request either an updated appraisal or an entirely new one.

“Usually I give a chart with comps and their obvious adjustments proving that the appraiser was wrong,” says real estate broker Deanna Kory.  “In many cases it’s possible to do this.  But the agent has to make a case—and a strong one!  If there was a bidding war, I have sent proof of the bidding war by whiting out names but sending the offer letters.”

Make sure that the appraiser did not leave out any amenities or other factors such as outdoor space, views, and condition, says Halstead Property executive director of development marketing Stephen Kliegerman.  

Also, says Kliegerman, “some appraisers use information from Property Shark for their compass, and although it is a very good resource, the information is not perfect and often does not include current photos or a description of the property that would properly allow the appraiser to evaluate the comps versus the subject property.” 

If your contract includes a finance contingency clause, you have the right to walk away from the deal right now with your deposit.

“If the seller won’t budge on the price,” suggests real estate broker Doug Heddings, “use that as leverage to get the seller to adjust the price.”

Real estate attorney Jeffrey Reich offers another alternative:  If your mortgage bank consents, ask the seller to loan you the amount you’re unable to borrow because of the low appraisal. That is commonly referred to as ‘taking back paper’ or providing ‘purchase money financing,’ says Reich.


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