High and Low Appraisals: What You Need to Know

When you buy a condo or loft for sale in DTLA, your lender will probably require an appraisal. But what happens if the appraiser’s value doesn’t match the home’s sales price?

Here’s what you need to know.

High and Low Appraisals: What You Need to Know

An appraisal can go one of three ways:

It can come pretty close to the home’s sales price
It can be higher than the home’s sales price
It can be lower than the home’s sales price

So what do you do in each situation?

When the Appraisal Matches the Sales Price

If the lender’s appraisal comes in close to – or right at – the home’s sales price, you’re in good shape. This means the lender believes the home is worth what you want to buy it for.

When the Appraisal is Higher Than the Sales Price

If a condo appraises higher than the sales price, you’re looking at a win. When you purchase the property, you already have more equity in it than you originally thought you would.

For example, if the home’s sales price is $300,000 and it appraises for a value of $320,000, that means you already have $20,000 in equity.

When the Appraisal is Lower Than the Sales Price

Sometimes a condo or loft appraisal is lower than its sales price. The lender isn’t likely to finance you the full amount of the sales price because the home is worth less than that. However, that doesn’t mean your lender will back out of the deal – it just means you might have to come up with the additional money to cover the rest of the mortgage amount.

For example, if the home is listed at $300,000 and the appraisal says it’s only worth $280,000, the lender is only likely to finance you $280,000. That means you’ll have to come up with the additional $20,000 to buy the condo or loft.

Other options for a low appraisal include:

Paying for a second appraisal, which may or may not work out in your favor
Renegotiate with the seller to lower the price
Challenge the appraisal with the lender (with your DTLA Realtor’s® help)
Ask the seller to come up with the additional money to cover the gap

Are You Buying a Loft or Condo for Sale in DTLA?

Call us at 213-254-7626 or get in touch with us online to start exploring your options when you want to buy a loft or condo in downtown Los Angeles.

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