Can a Low Appraisal Be Fixed?

Can a low appraisal be fixed on a home in Farmington, Kaysville or anywhere in Davis County, Utah? Sometimes, and the way to find out is to read the appraisal line by line before anyone renegotiates the price, which is exactly what my years of writing broker price opinions to appraisal standards for lenders, HUD and Fannie Mae taught me to do.

Not every low appraisal is wrong, and nobody can promise one will come up. But some of them have real errors in them, and those can be corrected. I have seen appraisals raised by tens of thousands of dollars, and I have two deals below where the number came back by $70,000 and by $200,000.

I am David Supinger, Principal Broker of Home Click Real Estate. I live in Farmington, and most of my sales are in Davis County, so the examples here are from Fruit Heights and Bountiful.

The buyer's lender lends on the purchase price or the appraised value, whichever is less. So when the appraisal comes in under the contract price, the difference, the appraisal gap, has to be solved before the deal can close.

A low appraisal does not automatically mean the buyer brings more cash. If the buyer is putting a lot down, the lender can simply move money: part of the down payment covers the gap, the loan amount stays the same and the payment stays the same. If the buyer is putting the minimum down, the options are the ones every Utah buyer and seller ends up choosing between.

The buyer covers the gap in cash. The lender will not finance any of it.

The seller lowers the price to the appraisal. This has a good chance of landing when there was no competing offer. If there was, the seller may go back to the other buyer instead.

They meet in between. Oftentimes we split the difference, and it does not have to be 50/50.

The buyer cancels. If the home appraises below the purchase price, the buyer has the right to cancel under the appraisal condition in the Utah Real Estate Purchase Contract (REPC).

Every one of those options assumes the appraisal is right. Before choosing any of them, it is worth finding out whether it is.

Most of the time it is one of four things.

The appraiser is not from here. Sometimes the appraiser is from an hour and a half away. Someone from far up the Wasatch Front will not know by instinct that prices step up above Bountiful Boulevard, or on the east side of Farmington up on the bench, so comparables that are close on a map get pulled even though they are not close in value.

A comparable sale was missed. Something really close to the home, with a similar floor plan, that never made it into the report. One missed sale can change the whole outcome.

The math is wrong. An adjustment added where it should have been subtracted, or a figure carried wrong from one line to the next.

The home was measured wrong. I have found appraisers who measured wrong and missed part of the basement. Completely missed it.

Sometimes the appraisal is low because the buyer paid a lot more than the market. In a multiple-offer situation where a buyer goes well over asking to win, the gap was foreseeable before the appraiser ever showed up. That one is not an error.

This is the order I work in when an appraisal comes in under the contract price.

1. Get a copy of the appraisal. Without the document there is nothing to review.

2. Read it line by line, digit by digit, number by number. Square footage on each level, the basement and how much of it is finished, beds, baths, lot size, garage, condition, the dates of the sales, the distance to each comparable, and the concessions on each one.

3. Read what is not in it. Look at which comparable sales the appraiser chose to use, and which ones they chose not to use. The missing sale is as much a finding as a wrong number, and it is the half most people never check.

4. Sort what you find. A calculation error or a measuring error is the easy kind, because it is simply wrong and has to be corrected. Getting an appraiser to change their comparables is harder.

5. Send sold homes, not active listings. Appraisers price on sold comparables, usually around six of them. They may mention a home under contract for perspective, but a packet of active listings will not move an appraised value.

6. If the appraiser will not change it, the buyer can change lenders. A new lender orders a new appraisal, often from an appraiser who is more local. That is the buyer's decision, and it works best when the buyer agrees the first number was wrong.

Keep in mind, appraisers are busy, they get paid for doing the job and not for making changes, and they like to stick to the numbers they chose up front, which is their right. The approach that works is giving them better information, not arguing with them.

907 East Old Farm Road, Fruit Heights. I listed it at $650,000, priced on the solid high side to begin with. An offer came in within five days at $15,000 over asking, with zero concessions. Then the appraisal came back $70,000 below the contract price.

I went through the appraisal line by line. I found errors that justified the sale price, and further errors that had been overlooked. The lender agreed with the review, but the appraiser would not make the changes.

The buyer was willing to work with us, because the buyer knew the true value of the property too. So the buyer changed lenders, the new lender sent a new appraiser, and the new appraisal came in at or above the contract price. It closed on 30 September 2020 at $665,000.

The seller got $15,000 over asking, and $70,000 more than the first appraisal said the house was worth. Nobody had to lose for that to happen. The buyer got the house at the price they had already offered.

This one was on the other side of the table. I represented the buyer on a 7,214-square-foot home on 2.32 acres in Summerwood Estates in Bountiful. My buyer wanted the house and was willing to pay for it, and we had negotiated the price. Then the appraisal came back about $200,000 under the price we had just agreed to.

A $200,000 gap is the moment a deal dies. The buyer either brings $200,000 to the table or walks away from the house they want.

Custom homes in that part of Bountiful are often built and sold without ever touching the MLS. So I went to the builders working in the area and pulled their own new-construction closings, sales no public search would surface. I gave those sales to the appraiser, and the appraiser was willing to use them. The value came up, and the deal closed at the price we had negotiated.

The appraiser made the call. I supplied information the appraiser had no way to find.

Treating it as a verdict. An appraisal is a document that can be reviewed, not the last word on what a home is worth.

Renegotiating before reading it. Once a seller agrees to a lower price, that is the price. Read it first.

Sending a stack of active listings. They will not move the value. Sold homes do.

Going after the appraiser. Appraisers are independent professionals and I am not the one who chooses them. The ones who come to my listings are not my appraisers. Giving them better information works. Attacking their work does not.

Assuming the buyer has to bring cash. With a large down payment, the lender can often cover the gap out of money the buyer was already bringing, with the same loan and the same payment.

Paying for the appraisal too early. I order it after the due diligence period, on purpose. If the inspection blows the deal up, the buyer has not spent money on an appraisal they no longer need. An appraiser gets paid for the visit, whether or not the deal closes.

Luxury homes have fewer sales to compare against, which is exactly where an appraiser from out of the area is most likely to reach for the wrong ones. Two things help before the appraisal ever happens.

Price from sales that can be defended, the same sales an appraiser would use. A home valuation built that way is a number you can stand behind when it is tested. And consider an appraisal floor in the contract, an agreed number the buyer covers if the appraisal comes in under it. It gives the seller a little bit of peace of mind, and it removes the fight before it starts.

If you are buying, ask how the price was built before you write the offer. How fast luxury homes sell in Farmington and Kaysville shows why the price range matters as much as the town.

Can you dispute a low appraisal? Can you dispute a low appraisal on a Utah home? You can ask for it to be reviewed and send the lender corrections and sold comparables. Calculation and measurement errors have to be corrected. A change of comparables is up to the appraiser.

Who pays when the appraisal is low? Who pays the difference when an appraisal comes in low? Whoever the buyer and seller agree pays it: the buyer in cash, the seller by lowering the price, or both by meeting in between. The lender will not finance the gap.

Can the buyer walk away after a low appraisal? Can a buyer cancel if the appraisal comes in low in Utah? Yes, under the appraisal condition in the Utah purchase contract, if the home appraises below the purchase price.

Can the seller order a new appraisal? Can the seller get a new appraisal? The appraisal belongs to the buyer's lender. A new one usually comes from the buyer changing lenders.

Does a low appraisal mean the house is worth less? Does a low appraisal mean my home is worth less? Not necessarily. In both of the deals above, a second appraisal valued the home at the contract price or higher.

David Supinger is the Principal Broker of Home Click Real Estate in Salt Lake City, Utah, with 34 years full time in the business, who has personally sold more than 1,300 homes across Davis and Salt Lake counties. He lives in Farmington and has 171 Farmington sales on record.

If you are selling in Farmington or Kaysville, or an appraisal has just come in under your contract price, send me a note and I will read it line by line with you.