How to Handle Low Appraisals with Your Sellers
Apr 26, 2023Remember when appraisals were the least of an agent’s worries? It wasn’t long ago. Over the past few years, the competitive nature of the buyer’s market meant that low appraisals were generally a mere blip in the journey. We’d just call up the next offer on the list and move on.
But as demand slows, and the economy shifts, appraisals are back on our minds. One of the key issues we’re seeing today is affordability. Buyers are at their max, and generally don’t have a ton of cash reserves to throw in at the last moment.
If you’re a listing agent, and you’re talking about low appraisals with your sellers for the first time as it’s popping up, you’re too late. One of the most important things you can do in this market is prepare your sellers for a low appraisal ahead of time. How ahead of time? I suggest you address it at your listing appointment. As I always say, bad news delivered early is just information. You only want to win a listing if you know it can close — and setting expectations is essential. Here’s how I’d suggest going about it:
Present the facts and set expectations around pricing.
Start by explaining that low appraisals do occasionally happen in this market. It’s not a result of who they list with. It’s simply something we see pop up more and more as a result of the market shift. Educate them on why the market is behaving this way (slowing buyer demand etc.).
This is a great time to stress the importance of competitive pricing. Explain how an overpriced home can impact the appraisal process. Of course, that’s why you’ve already done in-depth comparisons to land on an ideal price for the area and market conditions!
Explain the process and potential solutions.
Next, take them through what will happen if the appraisal comes through lower than expected. If they are unable to find a middle ground with the buyer or split the difference (this is happening less often), they will be left with a difficult choice. They will have two options:
- Lower the price to accommodate the buyer and new appraisal.
- Walk away from the offer and pursue a different buyer.
This decision will be up to them and is something they should consider beforehand. If it came down to it, are they more flexible on price or timeline? This is excellent information to be aware of beforehand if possible.
Let your clients know that you will be proactive around communication, and will stay in regular contact to see where they stand. Perhaps suggest a schedule for checking in on a weekly or biweekly basis depending on how quickly the process is moving. Choose a day and communication medium (phone, Zoom, etc.) so they can add it to their calendar.
Be their support system.
Above all, you want to ensure your sellers that you are the right agent to take them through this challenge or any other challenge that may arise through the listing process. By bringing this up, you are showing them that you are knowledgeable, honest, and experienced. You may even choose to share a success story from a past client to further highlight your expertise.
Remember that you never want a client to be hearing about something for the first time as it’s happening. Too often, agents don’t bring up low appraisals, which causes clients to feel blindsided when they feel they are in the home stretch with an offer. The more you can set expectations, the better. Use the topic of appraisals as a chance to highlight your expertise and transparency as an agent. Stay up-to-date on the latest market trends, and you’ll see the benefits of building these conversations into your listing process.
About Aaron Hodson:
Aaron Hodson is a keynote speaker, business strategist, and CEO of SellWell.
He’s spent 25+ years in the real estate industry in various capacities — from selling homes, to becoming CEO of one of the fastest growing real estate companies in the world, to coaching high-level sales agents and executives. Aaron has quite literally stood in your shoes as an agent: door knocking, making calls, and doing the hard work. He sold over 5,000 homes using his methods, and today, he wants to share those methods with you right here.
Fair warning: Aaron originally hails from New Zealand, so Kiwi-isms are to be expected.
