What happens if my home doesn’t appraise for the selling price?

Reader question: “I will be selling my home in a few weeks, or trying to anyway. I have heard stories from neighbors who’ve sold about issues they had with the appraisal. I’m concerned that my home won’t appraise for what I think it’s worth, which seems to be a trend in our area. What happens if my home doesn’t appraise for the selling price?”

If your home doesn’t appraise for the selling price, you and the buyer will both have to make some decisions. Those decisions could result in the deal moving forward, or falling off the tracks.

  • The buyer could pay the difference out of pocket, which doesn’t happen very often. In a rapidly appreciating market, a buyer might do this. Otherwise, it is generally viewed as a bad idea and discourage by real estate agents.
  • The other option is for you, the seller, to lower the selling price to match the appraisal. This is the more common scenario, especially when the sellers are motivated to sell and willing to accept the current market value of their home.

You could have a second appraisal done in order to “appeal” the first one, but the mortgage lender probably won’t want to hear it. More often than not, they work with appraisers they’ve been dealing with for some time. So they tend to go with the appraiser’s decision the first time around. Their business model would grind to a halt if they got into a dispute (and a “do over” scenario) every time a homeowner disagreed with a home appraisal.

The whole point of the lender’s appraisal is to protect the lender from investing in an overpriced asset. They might allow for a second appraisal, if you can present some hard data to show the first one was low. The lender wants the deal to go through as much as the seller and buyer do. So if you can present some valid information that disputes the original appraised value, they might consider doing it again. But they won’t simply dismiss the appraisal process just so the deal can go through. It’s there for a reason.

So that’s typically what happens when a home doesn’t appraise for the selling price.

When My Own Home Didn’t Appraise for the Asking Price…

I actually sold a home recently, and we were in this very situation. Here’s what happened when my home did not appraise for the selling price.

We had a feeling our price was a little high, and the appraiser’s report confirmed this. The buyer came back offering an amount that was a little lower than the lender’s appraisal amount. We countered with the actual appraisal amount.

It was our way of saying: “Okay, so we listed the home a bit high. We are coming down from that amount. Our counter is based on what the appraiser says the home is worth. So your lender is okay with this price. That’s the price we are going with.”

Long story short, the buyer eventually agreed and the deal moved forward.

So, what happens if your home doesn’t appraise for the selling price. One of several things. You can dispute the appraisal report. You can lower the selling price to match the value determined by the appraiser. The buyer can come up with the difference (rare, for several reasons). Or the buyer can simply walk away.

I would advise you to set a realistic asking price from the start, to reduce the chances of this happening. You never want to base the asking price on what you paid for the home in the past — that’s not an accurate reflection of current market conditions. You don’t pull this number out of the clear blue sky. You base it on current sales trends, using comparable sales data in your local area. If you do this, you’ll be less likely to have a situation where your home doesn’t appraise for the selling / listing price.