How should we handle negotiations if the bank appraisal comes in lower than our offer price?

Every situation is different, but ideally you should already have a good idea of whether the home is likely to appraise at, above, or below your offer price. Your Realtor should have reviewed comparable sales before you submitted the offer, using a similar approach to what an appraiser will later use. If the appraisal comes in low, the first step is usually to review the appraisal report and the supporting comps. Your Realtor can then gather additional data and respectfully negotiate with the listing agent for a price reduction. Remember, the appraisal is meant to provide an opinion of the property’s current market value. In many cases, sellers are willing to work with the buyer because another financed buyer may run into the same appraisal issue. If the seller does not want to reduce the price all the way to the appraised value, there may still be room to meet somewhere in the middle. You could agree to cover part of the gap rather than the entire amount. At that point, ask yourself: How much do you love the property? Is the appraisal gap financially comfortable for you? Does paying above the appraised value still make sense? If the numbers no longer make sense, it may be time to move on. There will be another home, and your Realtor can use the experience to help you analyze the next property carefully before making an offer.

Emma, before you negotiate anything, ask your lender to submit a reconsideration of value. Most buyers skip straight to arguing with the seller and never challenge the number itself, and the number is the only part that is actually reviewable. Here is what is really happening when an appraisal comes in low. Your lender will lend against the lower of the contract price or the appraised value. So a gap does not reduce your loan problem, it becomes a cash problem. If you are at $400,000 and it appraises at $385,000, that $15,000 comes out of your pocket on top of your down payment, or the price comes down, or the deal changes. Which is why the order of operations matters. Step one, the reconsideration of value. Your lender submits it, not you and not your agent directly. It works best when you give them ammunition: two or three closed sales the appraiser did not use, with dates, addresses, and why they are better comparables, plus any factual errors in the report such as wrong square footage, wrong bedroom count, or a missed renovation. An ROV is not "we disagree." It is "here is data you did not have." Sometimes it moves. Often it does not, but it costs you a few days and nothing else. Step two, if the value holds, you have four real options and all four get used: The seller reduces to the appraised value. Most common when the seller has no better offer waiting and knows the next buyer's appraisal will likely come in the same place. That last part is your strongest argument, and it is true. You cover the gap in cash. Only do this if you actually have the money after closing costs and reserves, and only if you believe in the house. You are paying above what a licensed third party says it is worth, which is sometimes reasonable and never automatic. You split it. Very common and often the fastest path to done. Seller drops half, you bring half. You walk. If your contract has an appraisal contingency and you are inside the window, this is your protection and your earnest money should be returned. Read the deadline now, today, before you spend a week negotiating past it. Missing that date is how buyers lose leverage and deposits at the same time. To your direct question about who usually gives: it depends almost entirely on how much competition the seller has. In a market where their home would relist and sit, sellers reduce. In a market with three backup offers, buyers pay. Ask your agent for one specific number, how many days the average home in your price range in Lockport has been taking to sell right now, and you will know which conversation you are in. Two practical things while you wait. Do not spend down your cash reserves before the appraisal comes back, because flexibility is worth more than a new sofa right now. And ask your agent whether your contract includes any appraisal gap coverage language, because if you already agreed to cover a gap up to a stated amount, that changes your options. I am Zoltan Peresztegi, a real estate professional in Los Angeles and the South Bay, and I am not a lender or an appraiser. I do not work Lockport, but I am happy to help you think through the numbers, or connect you with a strong local agent through my network. Start with the reconsideration of value, and check your contingency deadline today. Zoltan

Emma, sellers will typically ask buyers to cover the difference, especially if you are in a highly competitive market. If this is not the case, you can attempt to bridge the gap between the two of you. Very rarely does a seller eat the difference completely. Keith Jean-Pierre Managing Principal The Dapper Agents Real Estate Operations in ALL 50 States

Emma, the useful part of your situation is that nothing has actually gone wrong yet, so you have time to prepare instead of react. Ask your agent now to walk you through the recent sales that support your contract price. If those comps are solid, you may be bracing for a problem that never arrives. If a gap does show up, there's no default rule about who absorbs it. It gets negotiated, and the result usually tracks how badly the seller needs to close and whether anyone else is waiting behind you. I've had sellers drop straight to the appraised number, and I've had buyers bring the difference in cash because they wanted that particular house. A lot of deals settle in the middle. While you're waiting, read your appraisal contingency closely so you know what your exit looks like, and ask your lender what a shortfall would really cost you. I'm licensed in California, so have your Lockport agent confirm how Illinois handles it. Alla Novytska, Realtor®, JohnHart Real Estate, DRE #02254775

If the appraisal comes in lower than the purchase price, the first step is usually to review the appraisal and see if there are valid comparable sales that could support a higher value. From there, you can negotiate with the seller to lower the price, split the difference, or potentially challenge the appraisal. Whether the seller agrees depends on the market and their level of motivation. If they won’t lower the price, the buyer may need to cover the difference out of pocket so it’s important to discuss your options with your lender and agent before making a decision.