I get asked this question very often and it is a very valid concern in regards to the lending process these days!
When the appraisal comes in “low” it means that it is less than the contracted price. If the buyer was planning on putting the minimum down for the down payment then the low appraisal can cause a deficiency between the loan to value ratio.
Several things could happen:
The buyer submits an addendum to the seller to lower the price to the appraised price. FHA appraisals “stick” to a property for a certain period of time. If there is a high amount of FHA buyers in the market, it is wise for the seller to agree to the reduced price. Right now FHA buyers make up between 25-30% of the Las Vegas closed sales. That means if the seller rejects lowering the price to put the home back on the market, they will be shutting out the rest of the FHA buyers in the market – which as mentioned, is 25-30% of our market currently.
~OR~
The buyer makes up the deficiency by putting extra money down.
~OR~
The seller meets the buyer somewhere in the middle with the appraisal deficiency. In other words, the seller reduces the price a little and the buyer brings in extra cash for the down payment.
~AND OR~
The appraisal is contested by the buyer. This is a little harder than it sounds but it is always worth a shot!
If all fails and the seller will not reduce the price nor will the buyer come up with the difference, there may be an “appraisal contingency” in the contract. Check with a lawyer to make sure you are protected within the boundaries of your contract to get your earnest money deposit refunded. Best of luck, bumps in the transaction are never fun but they can be smoothed out most of the time!
RT @ReneeBLV: What Happens When My Las Vegas Appraisal Comes in Low? http://bit.ly/9WZZOp