Housing markets are constantly changing, heating up or cooling off. For that reason, bank appraisers are hired by lenders to make sure your home is priced fairly and to current market conditions.
Appraisers use a formula that includes historical trends, pendings, solds, features, amenities and days on market to make sure that your home's current value reflects housing conditions in your market.
Your home's market value has nothing to do with what you paid for it, how much money you need to retire or how much you need to buy your next home. Your real estate agent's market analysis doesn't determine market value - only a range of prices so you can choose a listing price that will help your home sell quickly.
Outside forces such as the economy can cause your home to depreciate. So can allowing your home to deteriorate by not making repairs and updates that keep up with buyer demands.
So what can you do if your home doesn't appraise? You can amend the contract to the appraised price or lose the buyer.
But wait, you may have other options. You can challenge the appraisal.
In some cases, banks use appraisal management companies that hire out-of-area appraisers, or they use low-cost appraisal products like automated appraisals instead of a full professional exterior and interior appraisal.
This is where your real estate professional really earns her stripes. She can determine what kind of appraisal was used to arrive at the home's valuation. If the buyer paid for a full appraisal and only received a drive-by, for example, the appraisal won't reflect your home's interior condition, so your new kitchen won't count.
Your agent can also examine the homes that were used in the appraisal and determine if the comparables are truly similar or not. If not, you have a fighting chance.
Have your agent provide an updated CMA (comparable market analysis.) It could be that new market information is available, such as homes that have sold recently that will help your case.
If the other comparables aren't in your favor, you may have to lower the price so you can proceed to closing.