Having a home that appraised below the initial offer is a fear among many homebuyers as this could set them back in their buying journey or cause additional hardships to secure the house they wish to call home. Appraisals in general are set in place to help protect both the buyer and the seller with all Real Estate transactions to help ensure that one party isn’t being taken advantage of.
What Happens if the House Appraised Below My Offer Amount?
However, there are a few dangers when it comes to appraisals, and in today’s market, we are seeing many homes appraised for far less than the current offered purchase price. What does this mean? To put it simply, a bank will only allow you to borrow the funds that meet the appraisal amount, meaning that if the appraisal comes in below what you are offering, you will personally have to make up the difference. For example:
Offered Purchase Price: $250,000
Appraisal Value: $200,000
In this scenario, the buyer would have to come up with an additional $50,000 to purchase the home as most lenders/banks would only allow you to borrow $200,000. The $50,000 would be additional needed funds on top of any down payments, appraisal/inspection fees, moving expenses, etc.
The main reason we have seen so many appraisals coming in below the purchase price is simply because of the current market. While the market is definitely starting to level out, the past few months have shown highly competitive Real Estate, where many buyers are choosing to pay the difference if it means they have a place of their own to call home. As the market starts to level and Real Estate Inventory begins to rise, many Real Estate professionals believe that appraisals will once again start to resemble numbers that are close to written purchase offers.
While for some people, paying the additional funds to secure a home may be worth it if they plan to reside in the home long term, however, for others, spending the extra cash may simply not be a feasible move as the property is stepping stone home that will be a temporary residence. If you find yourself in a position when your offered purchase price exceeds the appraised value, it is important to take a step back and truly decide if you feel it is worth the extra investment, and if not, simply pull out and continue your house hunting journey.
If you’re currently searching for a new home, are ready to sell your home and need a qualified seller’s agent, or if you have any questions regarding Medina Real Estate or New York Real Estate please feel free to contact our office at any time.
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