Low appraisals can become a big issue in a flat or declining real estate market. At this point, you really have three options:

  1. Accept less for your home, allowing the buyer to qualify for his loan based on the lower appraisal;
  2. Ask the buyer to put down more cash to cover the difference between the purchase price and the low appraisal - This is unlikely to happen in a Buyers' Market;
  3. Cancel the transactions. However, keep in mind that an FHA or VA appraisal will remain with your house for six months. If your next buyer has FHA financing, you will run into the same appraisal problem.

Of course, the best option is to look closely at the value of comparable sales in your neighborhood before you even put your home on the market. These days we have to sell almost every home twice - first to the buyer and secondly to the appraiser. If you're honest with yourself about how your home compares to others that have recently sole, it will allow you to either price the house so the appraisal won't be a problem or at least be prepared up front for the possibility of a low appraisal.

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