The Austin and surrounding area real estate market is trending up and that can create problems with low appraisals. Many sellers are aware of the risk of receiving a low appraisal. Sometimes sellers have already spoken with another listing agent before they choose to work with me. When I ask the seller what other listing agent suggested they can do more often that not the seller says the other agent just shrugged her shoulders and said

“There’s nothing we can do about a low appraisal. We’ll have to hope for the best.”

Not true! There are some procedures we can do to help prevent a low appraisal from killing your sale. My background in mortgage lending and working with appraisers gives me extra insight into how they establish value. If you follow these 3 steps you will have a better chance of not only getting a contract price that reflects the appreciating market, but also a contract price that can be closed.

1. What You Can Do Within The MLS?

List all the improvements and features of your house in the MLS listing. Not only what can be seen by the public where we are limited in space but add additional specific information to the “Agents Remarks” section and upload a PDF document where there is more space to justify your price. In particular pay special attention to the kitchen and master bath items. Those two areas are sections on the appraisal form which are broken out for the appraiser to list specific features. Some of this is psychological. Appraisers I know tell me they judge listing agents by how detailed we are.

2. Can I Talk With The Appraiser?

It is important for the listing agent to be an advocate for your home. Many people don’t understand that the listing agent can speak with the appraiser and provide them with documentation. Before an appraisal is scheduled I send a packet to the buyer’s lender to pass on to the appraiser. This packet contains all the features and benefits of your home as well as the comps supporting your value. The disadvantage an appraiser has when looking at the comps is he can only see pictures and read the old MLS description, which likely painted the comps in perhaps a better light than reality. If there were issues with the comps we know he is going to pull up I want to address them before he visits the property. For example the MLS photos for a comp may look great, but the house was actually in poor condition, which caused the lower sales price.

In case that information doesn’t get passed on from the lender to the appraiser I recommend we take off the lockbox and require the appraiser to make an appointment with me for access to the home. When he arrives I can provide him with the packet again and point out in person any issues with the comps we know will cause a problem if not addressed.

3. What Happens If We Still Get A Low Appraisal?

Many agents believe a contract is voidable if the appraisal comes in below the sales price. Particularly when there are multiple offers some buyer’s agents recommend a strategy of submitting a higher offer knowing the home won’t appraise and then try to renegotiate. That’s not always true, it depends on the buyer’s financing and what the contract says. If you are concerned about the appraisal being low we have had verbiage prepared by an attorney that can be attached to a contract requiring the buyer to increase their down payment if the appraisal comes in below the sales price.

“In the event the appraisal utilized by the buyer’s lender, or lenders,to determine the sum of all financing as set out in Paragraph 3b above shall be less than the Sales Price…”

Even in an appreciating market your home needs to be sold 3 times. Once to the buyer and buyer’s agent, once to the appraiser and once to the underwriter. It is important to have someone representing you who understands this process and will be pro-active when advocating for your property to keep a low appraisal from killing your sale.

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