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How a low appraisal can disrupt your home purchase

On Behalf of | Mar 4, 2024 | Real Estate Law

You’re ready to buy your dream home in California. The price is right, the location is perfect and you’re already visualizing your life there. But then the appraisal comes in, and it’s lower than the purchase price.

Before you know it, the low appraisal derails your home-buying journey. What happens next?

The impact of a low appraisal

When the appraised value of a home is lower than the purchase price, it can be a huge roadblock when buying a home. Lenders use the appraised value to determine the amount they’re willing to lend you. If your appraisal is low, they might not lend you enough to cover the purchase price. For example, if you’re looking at a house with a price tag of $500,000, but the appraisal comes in at $475,000, the bank may only offer you a mortgage for $475,000.

This situation leaves you with a gap between what you can borrow and the price you’ve agreed to pay. Suddenly, you find yourself scrambling to find extra funds or renegotiating with the seller to lower the price.

Dealing with the fallout of an appraisal

A low appraisal can create a stressful situation. You might feel like you’re back at the starting line, renegotiating a deal you once thought was final. If you can’t source the extra funds and the seller remains firm on the price, you could potentially lose the home. This can be particularly frustrating if you’ve already invested time and money into inspections and loan application fees.

Remember, if you’re confronted with a low appraisal and the challenges that come with it, there are certain strategies you should consider, such as challenging the appraisal or requesting a new one. However, these strategies might require additional time and resources. So, consider seeking an attorney experienced in real estate law. They can provide valuable guidance and help you understand your options.

Even if the journey becomes a bit more complicated, your dream home can still be within reach.