The number one cause of cancelation of a real estate sale is the lender receiving a low appraisal in response to the loan application. Three of the most basic responses are to dispute it, renegotiate with the seller and change lenders. These are not the only options, there are other, more daring tactics to help to get the home you want, even after it looks like all is lost.
Receiving a low appraisal has been one of the hazards of the market in recent years and low appraisals have caused the majority of sales cancellations. When lenders get low appraisals they tend to scrap the deal and you have to start the process all over again.
Getting creative and being stubborn enough to resist accepting a low appraisal has a better chance at success than doing nothing. After all, when it gets to that point, what do you have left to lose?
Get Your Own Appraisal
When it is the lender that has chosen the appraiser you do not have much power to control the quality of the service. Depending on the form of your lender, for example a mortgage broker that has limited choices and has to go with someone else’s vender list you may get an appraiser who is unfamiliar with your market.
Getting an alternative appraisal from a known expert in value for your neighborhood can be an effective way to persuade your lender to look again and reconsider your loan.
A Difference Of Cash
You might be wondering why, when the appraiser says the home is worth less than the asking price, you would be willing to put up more cash? It really depends on what the home is worth to you. If losing the deal will cause enough pain then it will be worth it to come up with some more cash. Of course, if you are mortgaging less then your payments will be less, proportionately.
If you have the cash on hand this might actually be the best alternative. If you do not have the cash on hand then you might consider changing your loan terms. It may be possible to proceed with reduced points on your loan, which could find the cash for you.
You might even go to the extreme of negative points which will give you cash at closing that you might be able to apply to your down payment. The cost of reducing points is of course, an increased interest rate on your loan. Changing your home loan terms in this way is something that needs to be carefully worked out before you make any decision.
Sellers Who Carry Seconds
If the seller is willing to carry a second mortgage note against the property you will be able to use that like cash at closing to make up your extra down payment. If you can cope with this extra debt it might be enough make the difference between a new home and starting a new search.