Real Estate Short Appraisals - What Are They?

When an appraisal in a real estate transaction comes in at less than the agreed upon sale price we call this a Short Appraisal because the value is ‘short’ of what is needed for financing. When this happens everything stops until a solution is found so the loan can be financed. One solution is for the seller to reduce their price to meet the appraised value. It seems to make sense for the seller to adjust because why would a buyer want to pay more than a professional appraiser said it is worth?  In a strong Seller’s market the owner may not be so quick to drop the price.  Their argument is often that there is another buyer in line that will make up the difference out of pocket. 

Which leads me to another way to solve the issue. The buyer covers the difference with cash. We call this appraisal gap coverage and you can view my video about it here on my website. Of course, most buyers don’t want to do this but in a market of sparse inventory this is a very real alternative. I’ve had many buyers offer this appraisal gap coverage in order to win the deal. 

Another solution is for the listing agent to go to work on challenging the appraisal. This is where your agent looks for comparable properties the appraiser may have missed or mistakes made in the appraisal. These can be presented to the appraiser in hopes they will modify the value. Be warned, you’d better have some solid evidence to make the challenge. From experience I can tell you it’s difficult to get an appraiser to change their results.  You basically have to prove them wrong.