Appraisal came in $20k low - what are my options?

The four real options

• The seller reduces the price to the appraised value.
• You bring the difference in cash, on top of your down payment.
• You split it, which is the most common outcome when both sides want the deal.
• You terminate, if your appraisal contingency is intact and inside its deadline.

The option people ask for and cannot have is a second appraisal on the same loan. That is generally unavailable without going through the lender reconsideration process first.

How to file a rebuttal worth reading

1. 1Send three closed comparable sales the appraiser did not use, with their closing dates. Active listings do not count.
2. 2List any permitted work that was not credited, with the permit numbers.
3. 3Note measurable differences the report missed: heated square footage, a properly converted garage, a re-roof, an addition.

Keep it factual and short. An appraiser will look at data and will not respond to disappointment.

Permitted work is where value hides

Roughly half the low appraisals I see are missing permitted square footage. Permitted additions and a permitted re-roof carry value; unpermitted ones carry none and can cost you on insurance as well.

That is why I tell sellers to pull the permit history before listing rather than discovering it inside someone else appraisal. If something was done without a permit, read which renovations need a permit — after-the-fact permitting is usually less painful than people expect.

If you are the buyer

Decide what the house is worth to you before you negotiate, not during. An appraisal is one opinion on one day; your risk is paying above the market and then needing to move in three years. On a VA loan the low-appraisal path has its own rules, and the neighbouring question is whether a VA offer gets rejected here.

Why appraisals come in low here

• Comparable sales that closed before the most recent movement in the market, which is normal in a thin subdivision.
• Heated square footage measured differently from the tax roll, usually around a converted garage or an enclosed lanai.
• Condition adjustments for a roof or an air-conditioning system at the end of its life.
• Unpermitted work, which is credited at nothing.

Three of those four are answerable with documents. That is why the rebuttal is worth the hour: you are not arguing about opinion, you are supplying the records the report was missing.