What Happens If A House Doesn't Appraise?


Buying or selling a house is a complex process that involves multiple steps and considerations. One critical step in this process is the home appraisal, which determines the value of the property. However, there are instances when a house doesn't appraise for the agreed-upon price. In this blog post, we will explore the potential consequences of a house not appraising and discuss the guidelines outlined in the contract to navigate such situations.

  1. Understanding the Home Appraisal Process: Before delving into the implications of a low appraisal, it's crucial to understand how the home appraisal process works. A home appraiser assesses the property's value based on various factors such as location, size, condition, comparable sales, and market conditions. The appraised value serves as a basis for lenders to determine the amount they are willing to lend for a mortgage.

  2. Consequences of a Low Appraisal: When a house doesn't appraise for the agreed-upon price, it can have several ramifications for both buyers and sellers. Here are a few potential scenarios:

    a. Renegotiation: In many cases, a low appraisal prompts renegotiation between the buyer and seller. The parties can attempt to reach a new agreement that reflects the appraised value, reducing the purchase price or adjusting other terms of the contract.

    b. Additional Cash Requirement: If the buyer still wishes to proceed with the original purchase price despite the low appraisal, they may need to bring additional cash to cover the difference between the appraised value and the loan amount.

    c. Termination of the Contract: A low appraisal can provide grounds for either the buyer or seller to terminate the contract. This decision may depend on the contract's specific contingencies and provisions relating to the appraisal.

  3. Guidelines Outlined in the Contract: To deal with appraisal-related issues effectively, it's essential to refer to the contract for guidance. Here are some guidelines that may be included:

    a. Appraisal Contingency: A common provision in real estate contracts is an appraisal contingency, which allows the buyer to withdraw from the deal or renegotiate the terms if the appraisal falls short of the purchase price.

    b. Dispute Resolution: In case of a disagreement over the appraisal, the contract may outline a dispute resolution process, such as obtaining a second opinion from another appraiser or engaging in mediation or arbitration.

    c. Timeframes and Deadlines: Contracts typically specify certain timeframes for completing the appraisal, resolving disputes, or reaching a new agreement. It is crucial to adhere to these deadlines to ensure a smooth and legally compliant process.

Conclusion: A low appraisal can introduce complications into a real estate transaction, requiring careful consideration and adherence to the guidelines established in the contract. By understanding the consequences of a house not appraising and utilizing the guidelines available, both buyers and sellers can navigate these situations effectively. Remember, it's crucial to consult with real estate professionals, such as agents and attorneys, to ensure you make informed decisions and protect your interests throughout the process.


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