What Happens If Your Frisco, Texas Home Appraises Below Your Offer?

If a Frisco, Texas home appraises below your offer, the appraised value is lower than the price you agreed to pay, and that gap gives you something to negotiate with. You can ask the seller to lower the price, or you can cancel the sale if the seller will not move. Either way, the appraisal is evidence, not a verdict.

I'm Omega Mejia, a real estate agent with Simply Great Real Estate Group, and I help buyers in Frisco, Texas and across Collin County. If you are one offer away from owning a home and the biggest thing keeping you up is overpaying, this post walks through what the appraisal is, when you see it, and what your options are when it comes in low.

An appraisal is a written opinion of what a property is worth. It is an independent assessment of the home's value, and it describes what makes the property valuable and may compare it to other properties in the neighborhood.

When you borrow money to buy, your lender may need a new appraisal and may require you to pay for it. That is normal. The lender is lending against the home, so the lender wants an outside opinion that the home supports the loan.

Some lenders also use an automated valuation when you first apply, as an early gauge of whether the price looks reasonable. Later, the lender may require a full appraisal by a licensed real estate appraiser. The full appraisal is the one that decides whether your price holds up.

Yes. On a typical home loan secured by a first mortgage, you are entitled to a copy of every appraisal and written value opinion your lender gets. The copy should reach you soon after the lender receives it in complete form, and no later than three days before closing.

The copy itself is free. A lender can charge a reasonable fee for the cost of preparing the appraisal or other valuation, but not for handing you the report. If you have not seen it, you are allowed to expect it. A lender can ask you to waive the three-day timing, and even then the lender still has to give you the copy.

It means the appraised value is below the sale price. The appraisal compares your home to similar properties, so a lower number says the price is above what that comparison supports.

That can feel like bad news, and for some buyers it feels personal, as if the offer was a mistake. It was not a mistake to fall in love with a house. The low number tells you something about the price before the money moves, and a buyer who learns that before closing is in a better spot than a buyer who learns it after.

A lender cannot interfere with the appraiser's judgment of the home's value. The appraiser reaches a number independently, and neither you, the seller nor the lender gets to nudge it.

Often, yes. A lower appraised value is strong evidence that the price was above market value, and you can use it to ask the seller to reduce the price. The seller sees the same report you do, and a report from an independent appraiser carries more weight than a feeling that the house is worth less.

This is where a plan helps. When I write an offer with a buyer, we talk about the appraisal before we sign, so a low number is a planned conversation and not a surprise. The strongest position in that conversation is a buyer who has a clear number they are comfortable with and a clear picture of what they will do if the seller does not budge.

If the seller will not reduce the price, you may be able to cancel the sale. The purchase contract may set out costs for cancelling, and a real estate attorney can read your contract and tell you exactly what cancelling would cost you. Those costs are likely small compared to the cost of overpaying for a home.

Buying a home for more than its appraised value is risky. The gap does not disappear at closing. It follows you into every conversation about what the home is worth later, including the day you decide to sell.

There is no automatic cooling-off period in a Texas home purchase, so your options come from the contract and its dates. That is one more reason to talk through the appraisal plan before you sign. My post on the option period when buying in Frisco covers the part of the contract that gives you an early way out.

No. Three different numbers get called "the value" of a home, and they do three different jobs.

The appraisal is a lender's opinion of what the home is worth for your loan. The appraisal district's value is a separate number used for property taxes. In Texas, appraisal districts value taxable property at market value as of January 1, and the district sets value only. Local taxing units set the tax rates. An online estimate is a computer's guess, and I explain why those drift in my post on how accurate online home value estimates are for Frisco homes.

A buyer who sees a tax value above or below the price should not read it as a signal about the appraisal. They measure different things on different dates.

A few habits keep a low appraisal from turning into a scramble:

• Get the report the moment your lender has it. You are entitled to a copy, and you want it early enough to act on, well before the three-day mark.
• Treat the gap as evidence. A lower appraised value is strong evidence you can put in front of the seller when you ask for a lower price.
• Decide your number before you sign. Know the price at which you would still be glad you bought, and the price at which you would walk.
• Know your exit dates. Your contract's dates decide what you can do and what it costs, so keep them in front of you from the first day.
• Keep your lender and your agent in the same conversation. The appraisal affects the loan and the price at once, and each of them sees a different half.

If you are getting ready to buy in Frisco, Texas and want a plan for the price, the appraisal and your contract dates before you make an offer, start with my buying a home page and the buying process. My making an offer page shows where the appraisal fits in. If you want to talk it through with me, contact me, and you can read the short answer on my FAQ page.

Source: Consumer Financial Protection Bureau, appraisal guidance for homebuyers; Texas Comptroller of Public Accounts, how property is valued; Texas Real Estate Commission consumer FAQ. This is general information, not legal, tax, financial or insurance advice.