What Happens if the House I am Buying Does Not Appraise?

Unless you are a cash buyer, you will be taking out a loan and the bank will require an appraisal to make sure the home is worth what you are paying for it (or that they aren’t loaning you more money than the collateral is worth – most banks hate that; the unscrupulous ones don’t).

It is possible that the home will not appraise out where it should – perhaps you are overpaying, or the market prices are dropping. And with more rigorous mortgage standards that seem to be appearing daily, and increased concerns about the industry and its lending practices, banks are becoming much stricter, and more careful.

What can happen?

  • You may be able to get a second opinion, if the bank allows it and they will accept it.
  • The bank may review the file more carefully (secondary review)
  • You can put more money down, thus decreasing the amount of the loan
  • You can re-negotiate the sales price with the seller
  • You won’t be approved for the loan and the deal will fall apart.

One way to avoid this is to make sure, when deciding on an offer, or the counter-offer that you will accept, is that you and your REALTOR (R) do a thorough due diligence and check on the comparable homes. If you are paying more than the market value you very likely will run into a problem, unless you are making a big downpayment. You should also understand what prices are doing in your particular market – your agent should have this information.

Responses to What Happens if the House I am Buying Does Not Appraise?

sandiegoremaster says: It’s typically the loan officer that orders the appraisal. As a loan officer and Realtor, I have access to the same comps as the appraiser. The Realtor has to check comps realistically and carefully. Also, the loan officer should ask the appraiser what is his or her expected general range for the appraisal, provided nothing unusual turns up during the appraisal. By paying close attention to the comps and seeking my appraiser’s opinion upfront, I’ve never, ever had a bad surprise when I got the appraisal report back.

Mark Harmon
San Diego First Time Home Buyer Specialist

Jeff Dowler says: I always recommend to buyers that one of the contingencies in their offer be that the home appraise. And of course if it does not they will not qualify for a loan any home. We are seeing some areas where lower appraisals are more commonplace.
Rafael says: I made an offer on a home and it was accepted by the seller. The house appraised approximately $10,000.00 lower than my offer. I am putting 20% down plus paying for my closing cost. My contract did include contigiant claus that house must appraise or deal can be broken. I guess if the seller does not wish to lower price to meet the appraisal than I can walk away, but will i lose out what I have invested so far.
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