After the inspection, the next hurdle is the appraisal of the home. The purpose of the appraisal is to prove to you and your lender that the house is worth what you have agreed to pay for it. Usually, the appraisal will indicate a value very close to the purchase price.
In the event that the house “appraises” low, (e.g., you are under contract at $205,000 and the appraisal comes in at $195,000), the seller is in a sticky situation. The lender will only lend on the appraised value.
There are three ways to resolve this problem:
★ The seller can agree to a reduced price
★ The buyer (you) can pay the difference between the appraised value and purchase price (ugh!)
★ You can back out.
Your real estate agent will advise you in this situation.