Compromise with the seller a good idea after a low appraisal

Q : The appraisal came in on the house I’m buying, and the value is much lower than the agreed upon price. Do I have to just walk away? I really love this house and don’t feel there is anything else out there for me. What should I do? I can afford to bring more money to the table, if needed.

A: I’m sorry to hear this is happening. The appraisal is critical to getting financing. The lender wants to know the house is worth the sales price. Most of the time, if they can’t do that, then they can’t give you the loan without your down payment and/or the purchase price changing.

An appraisal seeks to answer a seemingly simple question: What would a reasonable buyer pay for this house on the open market? It’s so simple, it appears to be a trick question. After all, you are a reasonable buyer, and you’ve agreed to pay a certain amount for the property. So why would an appraisal come in low? There are a few reasons that can happen, such as the size being smaller than expected, or the comparable properties the appraiser found do not support the price.

But the real question is not why, but what can you do about it.

You have a number of options, but they all have their challenges. Of course, you can walk away and get your earnest money back. But it doesn’t sound like you want to do that. You can ask the seller to lower the price to meet the appraisal value. But if it’s a big decrease, the seller might prefer to take their chances back on the market and see if the next appraisal comes in higher. You can try to object to the appraisal and ask the appraiser to reconsider their opinion, but that is unlikely to change things significantly, if at all. You can try changing lenders and getting a new appraisal done, but you could go through the entire process just to have the same thing happen again. Finally, if you want to keep the house, it’s most likely going to mean bringing more money to the closing as a down payment.

Since it sounds like you want to move forward, and if you can afford it, you might consider going to the seller and asking them to split this costs with you. They lower the purchase price by 50 percent of the “missing” amount, and you bring the other 50 percent in your down-payment. Of course, the seller doesn’t have to agree to that either, but you’re much more likely to get a “yes” if you’re willing to participate equally in the solution. If the seller does say “no,” then you have to decide if you’re able, and, second, if it’s worth bringing all of the money to closing to get this house. Only you can decide that.

See what the seller is willing to do and make your decision from there. Just remember, you’re buying the place you’re going to live in, and if this is the only house that will make you happy, then take that into account. After all, it’s not just an investment. It’s where and how you’re going to live your life for the foreseeable future.