VA Appraisal Comes In Low: What Are Your Options?
When it comes to buying a home with a VA loan, the VA appraisal plays a critical role in determining the value of the property. If the appraisal comes in lower than the sale price, it can lead to several options. This article will explore these options, their implications, and offer practical advice on how to navigate such a situation.
Understanding the VA Appraisal Process
The VA appraisal is a critical aspect of the home purchasing process. It is an independent assessment of the home's value to ensure the loan amount does not exceed the fair market value. The appraisal is critical because it helps both the buyer and seller set realistic expectations and agree on a fair price for the home.
Options When a VA Appraisal Comes In Low
1. Pay the Difference in Cash
One option is for the buyer to pay the difference between the sale price and the valuation in cash. However, this is less common due to the financial burden it places on the buyer. Some buyers might feel forced to use their savings or other resources to make up the shortfall, which could potentially disrupt their financial planning.
2. Price Reduction by the Seller
The seller can also lower the price to match the appraised value. This is one of the most common approaches. The seller may agree to reduce the asking price, which can make the home more attractive to buyers. However, price reductions might not be enough to fully satisfy the buyer. In some cases, the seller may offer additional concessions such as:
Reduced closing costs: Lowering the amount the seller pays in closing costs can help the buyer offset the difference between the sale price and the appraised value. This can be a significant benefit for the buyer, making the purchase more financially feasible.
Included appliances and fixtures: To compensate for the higher price, the seller might include appliances such as the refrigerator, washer, and dryer, or other fixtures. This can save the buyer money upfront and benefit them in the long term by making the home more livable.
3. Cancellation of the Sale
Another option is the cancellation of the sale. While this might seem appealing to the buyer, it is often a less practical solution for the seller. The seller may initially be upset, but they usually come to the realization that they are stuck with the appraisal for up to 180 days. If the seller needs to sell the house but the appraisal comes in low, they might need to remove the home from the market for 6 months and hope for a new buyer and a new appraisal. This process is time-consuming and risky.
The Best Course of Action: Proper Pricing and Representation
The best course of action is to collaborate with a seasoned Realtor who can conduct thorough research on comparable sales and set the price accurately from the beginning. A skilled Realtor can provide valuable insights, helping the seller position the home in the best possible light and ensuring that both the seller and buyer are satisfied with the final sale price. Proper pricing can mitigate the risk of a low appraisal, making the home more attractive and increasing the chances of a successful sale.
Conclusion
A low VA appraisal can indeed complicate the home purchasing process. However, with the right approach and the help of an experienced Realtor, it is possible to navigate this challenge effectively. By understanding the options and working closely with a knowledgeable professional, buyers and sellers can reach a mutually agreeable solution and proceed with the transaction smoothly.