But, the Seller (Understandably) May Not Go For It
Show me a listing agent (representing the Seller) who’s supremely confident that their client’s home will appraise . . . and I’ll show you a home that sold for too little.
Huh??
I only know of two ways to absolutely, positively eliminate the risk of a home not appraising — a stepping stone to the Buyer getting their mortgage.
That’s the case even in a rising market (like today’s), which certainly reduces appraisal risks, but doesn’t completely eliminate them.
Way #1: skip the mortgage, i.e., find a cash buyer.
Way #2: sell for so far below the Comp’s (“Comparable Sold Properties,” used to establish market value) that the risk goes away.
I don’t know many Sellers eager to give away their homes, just to eliminate the risk of non-appraisal.
Contractual Limitations
While it’s possible to contractually limit the fall-out from a non-appraisal, Buyers have to be very motivated to do that.
One such scenario: the home is in multiple offers, and — as a condition of selling to a particular Buyer — the Buyer has to agree to increase their down payment to compensate for any shortfall in the appraisal.
The problem for a Seller insisting on such a clause is that it telegraphs a concern that the home is overpriced.
Which leaves the boilerplate language in the standard Financing Addendum to govern in the event that the home doesn’t appraise.
Namely, if the home appraises low, the Buyer and Seller can either renegotiate the purchase price, or elect to cancel the deal.
See also, “Appraisal Multiple Choice – Spring 2013 Edition”; “Why Homes That Sell in Multiple Offers Should Always Appraise.“
