There is no doubt that the U.S. real estate market is red hot, red hot, red hot. This move toward speed has led to an odd problem with getting a mortgage: low appraisals. Here are your options if you get a low appraisal amount.
Appraisals
An appraisal is just when a qualified person tries to figure out how much a piece of property is worth. In the process, the property and other properties in the area are looked at, among other things. Mortgage lenders always require appraisals, so if you want to get the house, you have to deal with appraisal problems.
Let's say you have good credit, make a lot of money, and are ready to make a big down payment. You are happy, the lender is happy, and the only thing left to do is get an appraisal. The price you agreed to pay for the home is much higher than what the appraisal says. What's next?
First, you should breathe deeply. Getting a house is a very emotional experience. Try to take a step back and look at the situation with an open mind to see if you are paying too much for the property. If you still want to move forward, show the seller the appraisal and try to negotiate a lower price. There should be a way out, but if there isn't, be ready to leave.
Second, it's possible that the fair market values of homes in the area are going down. The market is starting to slow down, maybe even more so in your neighbourhood. If this is the case, you should thank the appraiser by giving him or her a big hug.
Last but not least, the appraiser might just be wrong. Appraisers are human and make mistakes. They might not know much about the area. There are many things that can cause an appraisal to be "wrong." If you think this might be the case, make sure the appraiser is comparing the home to similar homes in the area. If nothing else works, do your own evaluation so you can compare.
In the end, a low evaluation should be seen as a possible red flag. At the very least, you should look more closely to make sure you aren't getting ripped off.
