Waiting for home valuations is one of the more nerve-wracking parts of the home buying process. What’s worse? When it comes back much lower than you expected – or lower than the offer.

Why did it come back low? How do you salvage this?

It’s tough to stay calm when the deal seems to be falling apart, but it’s far from over. You have options. So, take a deep breath, then read on:

Why Do Low Valuations Happen?

Several factors can lead to the appraisal coming back lower than you expected:

• Declining Market Value: People may lose interest in the neighborhood, influencing the home valuation.
• Appraisals Based on Incomplete Data: The appraiser may have overlooked pending sales data or relied on sales that don’t quite fit your situation. Sometimes there might not be appropriate data to compare your sale to, skewing the result.
• Overpricing by the Seller: If the seller values their property too high, then this is an inevitable outcome.
• Appraiser Error: Even the best of us make mistakes. An inexperienced appraiser or unintended oversights can impact the home’s valuation.

Appealing the Appraisal (This Requires Your Lender)

Appealing the appraisal, more formally known as the “rebuttal of value”, requires some teamwork between you and your lender. The homeowner, the buyer, and mortgage officers must work together to find relevant market data that the appraiser may have missed. No simple task by yourself.

Casey Fleming, author of The Loan Guide: How to Get the Best Possible Mortgage, states:

“It is possible that the appraiser overlooked some important data (for instance, homes similar in location, square foot, and style). The appeal team can provide this data to the appraiser to justify their higher valuation.”

Data like recent listing prices showing a spike in home pricing can help or shifts in market demand for certain styles can tilt the scales in your favor and may just convince the appraiser to revise their valuation. This is not a guaranteed outcome, but it is a strong option.

Valuation Options for Home Purchase

While appealing the appraisal is the most direct way to deal with a low valuation, but you have some additional options. You could negotiate the purchase price to match the appraisal, bring in additional funds (if the loan requires it), or stop the purchase altogether. Putting a halt to the purchase may not be ideal, but it may be the better option if you’ve exhausted this list.