Selling your home includes getting an appraisal, but what do you do if your home is appraised for a lower-than-expected value? This can result in a contentious debate between you and the buyer and less money in your pocket. Let's look at what you can do when faced with a low appraisal after you've received an offer.

Your real estate agent determines the price of your home based off of their pricing expertise, the current state of the housing market, and a comparative market analysis (CMA). Some agents will also encourage an appraisal, before putting your home on the market, because it gives you a second opinion and more insight on the value of your home.

An appraisal is done by a professional who determines the value of your home based off of similar homes which have recently sold, the current housing market, and features of the home (size, # of bedrooms/bathrooms, lot size, etc.). The average cost of an appraisal ranges from $400-$1000.  Ideally, your agent will attend the appraiser's walk-through and review the report with you.

When your house goes under contract, the buyer's lender will order an appraisal too. The lender wants to make sure the buyer isn't over-borrowing because the home serves as collateral for the mortgage and the bank doesn't want to lose money. This protects the bank in case the borrower defaults on the loan or goes into foreclosure.

What do you do when your home was listed for $350,000 but only appraises for $295,000?

So what if the appraisal comes in much lower than the list price? For example, your agent listed your home for $350,000 but it was appraised for only $295,000. You don't want a low appraisal killing the deal! Will you have to lower the price of your home in order to sell it? It's possible, but there are options to overcoming a low home appraisal.

• Get a second (or third) opinion from a different, local appraiser
• Have your agent attend the appraisal
• Challenge the appraisal

Getting a second opinion can work in your favor, but make sure the new appraiser understands the local market. If your appraiser isn't local, they won't know the neighborhood and relevant submarkets which can result in inaccurate pricing.

By having your agent attend the appraisal, he/she can make sure your home is evaluated properly and hopefully avoid another low appraisal. Your agent can point out neighborhood comps (CMA), as well as features and upgrades, that may not have been included in the initial appraisal. By taking these actions, you may be able to avoid dropping the price of your home because of the initial low home appraisal.

You and your agent may wish to challenge the appraisal instead of getting a new appraisal. In this case, your agent requests a reconsideration of value form from the current appraiser.  You can only submit only one reconsideration.  If your agent feels this is a good option, he/she can present facts that support the original price and factors which may have been overlooked in the appraisal.  This option may or may not result in a change in the home's appraised value.

Conclusion

If you're faced with a low home appraisal, have your real estate agent order a new appraisal to avoid the likelihood of having to drop the price of your home. Make sure you're hiring a local appraiser so you receive the most accurate pricing results. Have your agent attend the appraisal so he/she can point out comps and upgrades the appraiser might not be aware of. By taking a proactive approach to re-evaluating your home's value, you will have a greater chance of getting the original list price and placing a "SOLD" sign in front of your home.

Check out our guide for even more information on selling your home: