Faced With a Low Appraisal? Check Out Your Options

Lenders rely on appraisals. So, if the appraisal on your dream home comes in lower than expected, it may kill your deal. But there are solutions.

Low appraisals happen for many reasons. A low appraisal may have nothing to do with your property – it may be all about the market: In a buyers’ market, a low appraisal may reflect high inventories due to market conditions; in a sellers’ market, particularly in hot areas with low inventory, multiple offers may push up prices artificially. Both can skew the data used by the appraiser to value the property.

Whatever the reason, you’d be wise to consult with your lender, who really does want your business, and your local real estate agent, to request a second appraisal. Even though you have to pay for it, the second appraisal often does come in higher; this may happen if the appraiser is inexperienced or not local and may have made the appraisal based on incorrect sales data.

Here are other options:

  • As the buyer, you can make up the difference between the low appraisal and the selling price in cash to the seller.
  • If you’re the seller, you can lower the price to be consistent with the appraisal.
  • The seller also can offer to hold a second mortgage on the property.
  • As the buyer, you can walk away from the transaction.

That said, if this is your dream house, chances are you’ll find it worth the effort and extra cost to make your deal work.

Opt for Roof Repairs, Not Granite, When Renovating

When homeowners hear the words “renovate” or “remodel”, most will have visions of granite countertops and hardwood floors dancing in their heads.

But, according to experts, you should be thinking structure over style; the outside of your home provides protection from the elements and should be your top priority when you’re deciding where to invest your renovation dollar. Ask yourself these questions. If you answer “yes,” it’s time to consider making some repairs.

Is your roof sagging? Tackle your roof first: Look for sagging areas, cracked or worn shingles, mold or rot, and dangling gutters and downspouts. Unless you’re experienced, don’t walk on an old roof yourself to look for damage – hire a professional. If your roof is in need of repair, don’t give in to the temptation to save money with a cheap fix; invest in high-quality shingles and installation.

Brick flaking? Examine your home’s exterior for signs of wear and tear. Chipping, peeling, and bubbling are symptoms of siding that may need repair or replacement. When it comes to brick, flaking, cracking or crumbling mortar may signal the need for TLC.

Basement leaking? Your basement is another area of the home that should be top-of-mind when deciding what to fix. Don’t ignore leaks, even small ones. Make sure that water isn’t getting in from outside. By fixing cracks in the foundation and properly insulating the basement, you’ll conquer “damp basement syndrome.”

Energy costs skyrocketing? Any renovation that improves efficiency is worthwhile. Greening your home can provide a recovery rate of up to 60 percent of the cost of the renovation. In old homes, windows, doors and skylights can be a big source of heat loss. To keep heat in and cold out, windows need to be double- or triple-glazed. Consider upgrading old windows and exterior doors to models that qualify as energy efficient.

Granite countertops can wait; these repairs can’t.