Appraisal Less Than Sales Price...Oh oh!

Every once in awhile an appraisal will be valued at less than the contracted sales price of a residential property. What happens then?

If the buyer is planning to apply for a mortgage to purchase property, then the lender will require an appraisal since the property is collateral for the mortgage loan. However, if the appraisal is less than the agreed-upon sales price, one of three situations will occur:

• The seller reduces the sales price to the appraised value.
• The buyer pays the difference between the appraised value and sales price in cash at closing.
• Both the buyer and seller agree to the concession.

No one knows at which price a property will sell so I always ask my sellers if they would consider having their home appraised before listing it for sale. That way, we don't waste time, we reduce stress and we have leverage for a full price offer before we enter into an unknown situation.

This is what the Smart Move program does for my clients.