 TITLE: What Happens if a Home Appraisal Comes In Low? CONTENT: You May Need Extra Cash if the Appraisal Is Low\n-----------------------------------------------\nAn appraisal can come in below the offer amount for a variety of reasons. Neighborhood housing prices may be on the decline, for instance, or the appraiser might determine that the home needs major repairs that aren't reflected in the asking price.\nRising prices and tight, competitive housing markets such as those seen across much of the U.S. over the past year also can cause appraised home values to fall short of offer prices: Buyers in bidding wars over hotly contested homes often make offers much greater than sellers' asking prices, and sometimes offers are so high that they exceed the home's appraised value.\nIf you outbid your home's appraised value, you have several options:\n*   **Accept the loan offer.** You can accept the offer based on the appraised value and then pay the seller enough cash to meet the offer price.\n*   **Withdraw your purchase offer.** Depending on the nature of your offer letter and whether local laws consider you \"under contract\" to buy the home at the time of the appraisal, withdrawing an offer could mean forfeiting some or all of any good-faith deposit (also known as earnest money) you submit with the offer. Including a check for 1% to 2% of the offer price with an offer letter is common in many (but not all) housing markets. This money is treated as a portion of your down payment but may be subject to forfeiture if the offer is withdrawn, depending on applicable local laws and the language of the offer letter or sales contract. (In some states, the offer letter _is_ a sales contract, which becomes binding as soon as the seller signs it; the offer letter and contract are separate documents in other jurisdictions, and the obligations associated with each depend on local laws.) Guidance from a real estate attorney could be helpful in this scenario.\n*   **Negotiate with the seller.** In light of the appraisal, you may get the seller to agree to a lower sale price. This is a viable strategy in cooler housing markets, but it's riskier in situations where sellers are sorting through multiple purchase offers.\n*   **Rebut the appraisal.** In some locales, the law allows you to hire an appraiser of your own to challenge the findings of the lender's appraiser. They might do so by considering a wider range of comparable properties than the lender's appraiser did, or by making a case for adding value based on amenities that are unique in the market (outbuildings, indoor pool, sauna and the like). This can be a costly process, and the bar for successful rebuttal is high. Also, in a hot real estate market, in which the seller has multiple offers to choose from, they'll likely just move on to another buyer rather than await the outcome of a challenge. END