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Hi, I'm Ella Gurfinkel, your host of the AskElla Show and senior loan officer at Fairway Independent Mortgage. On my podcast, I cut through the noise to bring you honest conversations about real estate, mortgages, and financial planning.
I interview industry experts to tackle everything from homebuying basics to complex topics like reverse mortgages, trusts, and market trends. With decades of experience, I'm passionate about dispelling myths and providing clear, actionable advice.
Whether you're buying your first home, refinancing, or planning for retirement, I'm here to help you make informed decisions. Join me for straightforward talk about real estate and beyond!
you're a buyer's agent and the appraisal just came in $30,000 below your contract price and now your entire deal as at risk for your buyer hi there I'm Ella Gerfinkle and I've rescued many deals from this exact situation today I'm sharing the exact playbook I use to save transactions when appraisals come in low so you can protect your commission and get your clients to the closing table here's [Music] the timeline appraisal comes in low here's what you want to do in the first 24 hours assess and strategize when that low appraisal hits your inbox time is of the essence your first thing is to calculate the exact gap and determine who has what resources we need to know how big is the shortfall does the buyer have the additional cash is the seller motivated enough to negotiate what is the loan program for example last month I had a $425,000 purchase with a $395,000 appraisal that's a 30K gap the buyer only has 15 extra but not the full 30K so we needed to find another 15K to save and to save the deal this is where restructuring the financing comes into place here are two specific ways to restructure financing when the appraisal falls short option number one split the difference with a higher down payment if your buyer has some extra cash they can increase their down payment to cover part of the gap the key is showing them they're not losing this money it's going straight into their equity option number two loan program switch sometimes switching from conventional to FHA or from FHA to conventional can solve the problem it is very very very buyer financing specific but different loan types have different appraisal requirements and loan to value limits in my $30,000 gap example we had the buyer bring in $15,000 extra cash while splitting the rest of the difference with a seller deal saved now one of the first things that we discuss actually before even restructuring the financing is uh possibly the reconsideration of value and the process behind it while we have a pretty short window of time to request it meaning we want to get the ball rolling ASAP here is how that process works we provide the full appraisal report and we will go over the appraisal report with you looking for errors in comparable selection square footage calculations or amenity adjustments we will be asking for extra help in coming up with better or additional comparables that weren't used by the appraiser the key is finding properties more similar to our subject property that sold for higher prices this is now part of a process that recently has undergone a tremendous change so if you get nothing else out of my video this piece you really want to be fully aware of back in the day we were the ones the lender we were the ones who had to submit the formal reconsideration request to identify specific errors to provide better comparables with your help etc now you will never guess who has to submit the reconsideration of value and it ain't us the lender if you get the hint and it's not you guys the agents it is the borrower so now the buyer is tasked and responsible for requesting the reconsideration of value interesting e the key here is to be professional not emotional which has happened multiple times but the key here also is the team effort that goes into coming up with those additional comparables and poking holes in the existing appraisal now granted we can get emotional about the reconsideration process we all have and the line I hear a lot a lot a lot a lot from the agents is that I've never had the reconsideration of value work let me correct you right there i have it's a 50/50 crapshoot am I being optimistic maybe but it's a 50/50 shot and I've been in multiple situations where the reconsideration of value actually has worked to our benefit we can easily claw back about 5 to 10% of the appraised value will it come back up to the contract price possibly will it still come in below the contract price also very possible now another tool in the toolbox is reallocating the seller concessions if the seller has already agreed to closing cost concessions we can reallocate those to help bridge the gap for example if the seller offered $10,000 in closing costs we can reduce that to five have them reduce the purchase price by five instead and it helps because now the buyer needs less cash at closing the loan amount is reduced the appraisal gap is smaller i mean we can talk and on and on about that but I have personally used this strategy a few times over my career where neither party had the extra cash to bring to the table split the difference negotiation m here is what I suggest we talk about reach out to the listing agent and let them know that we all want this deal to close our buyers are committed to this home and are willing to bring in an additional X amount of dollars to bridge part of the gap however they simply don't have the full 30,000 to play with if your sellers can meet us halfway by reducing the price by a certain amount we can close on schedule without further delays or having to put the house back on the market this approach works not every time of course just like everything else because it acknowledges both sides constraints while offering a solution that gets everyone what they ultimately want a closed transaction let me tell you something else that's a little more personal when I was buying my Arizona home guess what my appraisal came in low the tactic I used the renegotiation was not an option i bought during the crazy co time so renegotiate what but I only reduced my down payment by the appraisal gap and that gap was quite significant to be honest but I reduced the down payment and just restructured my financing ever so slightly but I still ended up with what I wanted and the goal here is to save the buyer their home that they clearly like enough to make an offer on and to get accepted so let's together work on helping both sides bridge the gap if you want to send me the details of a situation that you're dealing with and I'll give you a custom strategy to save your deal your buyer's deal or better yet the next time you're writing an offer in a situational appraisal might be an issue let's talk before you submit it so we can build in protections from the start the link to my calendar is in the description let's save your commission check together [Music]