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Not every State handles appraisal issues exactly the same way so I can only answer what happens in Texas. And as always, I AM NOT AN ATTORNEY!The TREC (Texas Real Estate Commission) promulgated forms address appraisal in the actual purchase documents.If your buyer is utilizing a VA or FHA loan, the Third Party Financing Addendum actually addresses the appraisal and what happens if value is not met. Conventional financing, through this same addendum, offers a financing contingency clause for a timeline within which the buyer is protected. There is also now a specific Addendum that allows buyer to terminate the contract as it relates to the appraisal. This new addendum clears up any ambiguity as to the appraisal, if seller agrees to sign it.That said, an appraisal is still a subjective opinion of an appraiser. I have experienced multiple appraisals on properties that have varied widely with little or no reason for the variation. I have seen good transactions killed because of sloppy appraisals and limited ability or recourse to correct a flawed appraisal. Again, it is just an opinion. However, usually the mortgaged amount is based on the sales price and any deviation from that sales price will have to be approved by the lender or the shortfall made up by the buyer at closing.Buyers,in my experience, have the following choices to make if the property fails to meet value.Renegotiate with seller and convince seller to agree to sell at appraised value.Renegotiate with seller to meet somewhere in the middle, seller agrees to lower price below sales price but not at appraised value and buyer agrees to make up difference at closing.Buyer accepts sales price and makes up entire difference between sale price and appraised value at closing.Buyer terminates contract and moves on. However, buyer should confirm with an attorney any ramifications, legal and financial, that such a termination might cause.Personally, if you are working with a really good REALTOR who can demonstrate the market, then you can make a good decision as to which path to take. If you are in a very hot, low-inventory market, then chances are many homes will not appraise, especially if they are involved in multiple offer situations. Just because an appraiser cannot show a specific value using his formulas, his knowledge of the market and knowledge of the specific area, does not mean that the value is not there. My current home appraised $ 20,000 less than the contract price. The market was hot, inventory extremely limited and I wanted this house, in this community, and I was willing to pay the difference to make it work.Hope that helps. Good luck!

Thanks for the A2A. Real estate contracts vary from state to state, so make sure you check with your agent, broker, or real estate attorney. The state of Texas offers a LOT of outs for the buyer and really none for the seller. There is an option period (if you paid for it), there is the financing period (if you are using that addendum), the appraisal (again, if you are using the financing addendum), and then there is always the option to ask out of the contract and forfeit your earnest money. If the home is in an HOA and you used the HOA addendum, you have the right to cancel within a certain number of days of getting the HOA docs. You also have a certain period with the sellers disclosure document if you didn’t receive that up front.A good agent will know all of the outs in a contract and how to take advantage of those to protect their buyer. I hope you are using your own agent and not using the sellers agent… they work for the seller, not you.Good luck in whatever it is you are trying to do. Speak with your agent, broker, or real estate attorney and ask them where you might be able to get out if that’s what you really want to do.

What happens if your house doesn't appraise for asking price?The answer is it depends. In many cases, the seller will reduce the sales price to match the appraisal in order to complete the sale.If the buyer is using VA or FHA financing to purchase the house, there is a provision in the third party finance addendum in Texas that states the home must appraise for the sales price or the buyer can back out. Since the seller now knows the appraised price, they are unlikely to get full asking price.If the buyer is using Conventional morgage to finance the house, then the house has to appraise for at least the loan amount. Meaning that a conventional buyer buying a home for $400,000 with 20% down and conventional mortgage of $360,000, the house will need to appraise for at least $360,000 or the buyer can back out.If the buyer is using all cash, then unless the buyer has added an appraisal addendum stating that the home must appraise for a certain amount, the buyer is still obligated to complete the purchase.There are probably a number of other answers depending on circumstances but this should give you some idea of what to expect.