What Can We Do If Our Appraisal Is Below The Purchase Price?

Q: We have loan approval, have a 20% downpayment and have signed off on the one contingency we had (an electrical issue found on inspection). The appraisal came in at almost $20,000 below the contract price. It seems that the sellers are almost underwater on their mortgage, and had to bring money to the table to reach the contract price. We are being urged to try another lender, as the listing agent and our own agent seem to think our lender (a major bank) purposely gives low appraisals. This sounds suspicious to us. Is this the norm? We’re about to walk away from the deal, as it seems there is no way to make it work.

A: I doubt that lenders purposely give low appraisals. Lenders make money by making loans, which only happens when the sale is completed. Low appraisals are not conducive to making sales happen. Some banks, though, assign appraisals to “the next appraiser in line,” even if that particular appraiser is not familiar with the area in which the property lies. You can request a review and ask the agents involved to present information that the appraiser may not have considered. You may be able to request (and pay for) a new appraisal, if the bank will accept it. Your only other alternatives are to switch to a mortgage broker who represents several investors (one or two of which may have more familiarity with the area where the property is located), or to walk away altogether. The choice is yours, since you know best how important this property is to you.