What Happens If the Appraisal Comes In Low in Arizona?
Quick answer: If you're financing and the appraisal comes in below the purchase price, the standard Arizona contract gives you five days after notice of the appraised value to cancel and get your earnest money back, as long as you haven't waived the appraisal contingency. Most of the time, though, buyers and sellers work it out instead.
Why does the appraisal matter?
Your lender will only lend based on the lower of the price or the appraised value. Say you're buying at $500,000 and the home appraises at $480,000: the loan is figured on $480,000. That $20,000 difference has to be covered somehow, or the deal changes.
What are your options?
Renegotiate the price. The seller lowers the price to the appraised value, or partway.
Cover the gap. You bring the difference in cash, on top of your down payment.
Meet in the middle. The seller comes down some and you cover the rest.
Cancel. If you haven't waived the appraisal contingency, you can cancel within the five-day window and your earnest money comes back.
You can also ask your lender about a reconsideration of value. If the appraiser missed a better comparable sale, your agent can send it through the lender for review. It doesn't always change the number, but it's worth asking.
What about waiving the appraisal contingency?
Some buyers waive it to make an offer stronger, or offer to cover a gap up to a set amount. That can work, but know the risk: if you waive it and can't cover the difference, you could lose your earnest money. FHA and VA loans have their own appraisal protections that buyers can't waive.
If you're the seller
A low appraisal doesn't mean you have to take the lower number. But the next buyer's lender will likely use a similar appraisal process, so it's worth weighing the offer in front of you against starting over. Pricing with solid comps up front is the best way to avoid this.
The bottom line
A low appraisal is a negotiation, not a dead end. Know your five-day window, know how much cash you could bring if you want to, and talk it through with your agent right away.
Buying or selling soon? Reach out and I'll help you plan for the appraisal before it happens.
Warmly, Molly
General information only, not legal or lending advice. Talk with your lender about how your loan handles appraisals, and review your contract with your agent.
