You decided to buy a Jersey Shore home. Congratulations! If you need to get funding for your purchase, your lender requires that an appraisal be performed. They need to know that the property is at least worth the amount you borrow for it. Otherwise, they could deny you your loan. But what happens if they receive a low appraisal number? Do not worry. You have a few options to consider if you really want that home.
How to Handle a Low Appraisal
Appraisal Gap Clause
One of the first ways to handle the possibility of a low appraisal (especially in a seller’s market) is to add an appraisal gap clause into your offer. As part of your offer, you tell the seller exactly what you would be willing to do if the appraisal comes in lower than the sale price. For example, you say that you plan to pay the full difference between the appraised value and your offer price. Or, you agree to pay a certain percentage more towards the “gap” in the two values, with the seller bringing their price down to meet the difference. This helps make your offer look stronger to the seller while keeping your exposure in check. Talk to your real estate agent about this option when putting together your initial offer.
Make an Appeal
Next, consider an appeal. I can tell you that this happens more than you might think. New comps in the area may help bring the value of your Jersey Shore home up to where you need it. If your agent strongly believes that your property is worth more than the appraised value, they can request that either the current appraiser use the information the agent has to re-evaluate the appraised value or request that a different appraiser make a valuation of the property. However, keep in mind that the next appraiser may not agree with you and your agent. But it might be worth a shot.
Re-negotiate the Price
Renegotiating the price provides another option for you. Here is where an appraisal contingency in your sales contract works in your favor. If your lender will not approve your loan based on the low appraisal, chances are good that they will run up against this problem with the next buyer. So, they might be willing to lower their price in order to make this deal happen. Even so, they might be willing to risk another buyer coming in and offering more cash to cover the difference. Therefore, there is no guarantee that they will lower the sale price.
Just Walk Away
Finally, you might choose the last option…just walk away. With an appraisal contingency in place, you even get to walk away with your earnest money deposit. Yes, you may feel heartbroken about losing out on this Jersey Shore home. But you should never pay more than you are willing or able to in order to secure a property. That only leads to regret. Besides, I’ll find you another property for you to love.
Beach Badge Inspectors Wanted
Jersey Shore beach badges are currently on sale. You must purchase them soon to receive the discounted rate. Every visitor to our Jersey Shore beaches aged 12 or over must carry a badge with them when they visit our beaches this summer. Ventnor needs beach badge checkers. If you are at least 14 years old and are interested in the job, visit Ventnor City’s website to download and fill out an application today.
Sherri Lilienfeld, Apex Prime Realty, Your Source for Jersey Shore Real Estate