Does a Low Appraisal Need to Be Shared with the Seller?

sharing paperwork in office

It’s no surprise that appraisals are part of the process when it comes to real estate sales, but sometimes low appraisals can be a surprise. When this happens, lenders may decline to finance. And, if there’s a home appraisal or loan contingency, the sale may not go through.

Recently we talked to a CRES client who is the listing agent for a property. He recently learned that the buyer may back out because of a low appraisal. He wanted to know if the seller gets a copy of the appraisal. 

Who Gets Copies of a Low Appraisal 

The seller often does not generally get a copy of the appraisal, but they can request one. The CRES Risk Management legal advice team noted that an appraisal is material to a transaction and like a property inspection report for a purchase, it needs to be provided to the seller, whether or not the sale closes. 

How Can You Avoid a Low Appraisal 

A number of factors can lead to a low appraisal, some of which are out of a seller’s hands. Over-inflated prices or a number of foreclosures in the area can both affect appraisals as can rising or declining market values.

Being prepared in advance for the appraisal can help. While the house doesn’t have to be spotless, you don’t want clutter keeping the appraiser from getting to or seeing anything in the house, yard or garage. In addition, having any necessary documents available and organized helps the process along. Sometimes it’s a matter of preparing the seller for appraisals regarding upgrades they made, and setting realistic expectations based on what they see on Zillow or other sites. 

What Happens After a Low Appraisal 

You can see why the seller would want a copy of a low appraisal. They can look for misinformation that could have affected the appraisal and dispute it. In such a case, the process is to contact the lending institution and ask for their dispute process. 

The seller can ask the buyer to request a new appraisal. The lender may order a second appraisal.  The cost of that second appraisal may be split between buyer and seller if both parties agree. Or buyer may request that seller cover the cost.  

If the appraisal stands, the seller can choose to renegotiate or consider seller financing of part of the price.  Or they may choose to put the property back on the market, in which case a new appraisal is likely. 

Do you have questions about an appraisal – or maybe another legal issue? CRES clients can call the CRES ClaimPrevent® Hotline 7 days a week. Clients receive a guaranteed response within 4 hours or next business day, with recommendations confirmed in writing.

What have you done after a low appraisal?

This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.

Originally Published July 24, 2019

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