Most home buyers need a mortgage to buy a home. Before a mortgage is approved, the lender or mortgage broker usually hires an appraiser to verify the market value of the property. Ideally, the appraised value matches the price the buyer has agreed to pay.

When a property appraises for less than the purchase price, the transaction can be in jeopardy. However, a low appraisal won’t necessarily stand in the way of the lender granting the loan if the borrowers are making a large cash down payment.

For example, let’s say you agree to pay $1 million for a property, and you have $300,000 for a down payment. The appraiser puts a $950,000 value on the property, which is less than you’ve agreed to pay. You’re a well-qualified buyer, so the lender is willing to give you a loan for 80 percent of the appraised value, or $760,000.

With a $300,000 cash down payment, you only need a $700,000 mortgage. So, the sale can proceed unless you have a problem buying a property that appraised for less than you agreed to pay.

Most buyers would rather have the property they’re buying appraise for the purchase price. But in some cases a house fits the buyers’ needs so perfectly that a low appraisal is irrelevant to them as long as they have the cash to close the sale.

A real problem develops when the buyer doesn’t have the additional cash to put down to make up the difference between the appraised value and the purchase price. This can easily happen if the buyers are making a low cash down payment in relationship to the purchase price or they are putting no cash down at all.

Low- and no-cash-down buyers often wonder why it should make a difference to the seller how much cash they put down if they are approved for the mortgage. It can make a big difference if the appraisal comes in lower that the purchase price and the buyers have no additional cash to put down.

HOUSE HUNTING: What can you do in this situation? One possibility is to ask for a second appraisal. There are a lot of new appraisers in the business today. Many don’t have much experience. Make sure you insist on an appraiser who is experienced and knowledgeable in the area where the property is located. .

Another option is to ask the sellers to renegotiate the purchase price. Although no seller is thrilled about accepting less than the negotiated price, this option may work if the seller’s prospects of getting a higher price are slim.

Some buyers recently made an offer in competition on a home in the Crocker Highlands section of Oakland, Calif. In the frenzy of the bidding contest, they offered a price that could not be substantiated by the recent comparable sales. The sellers, who had a good understanding of local market value, agreed to accept a lower price and the sale went through.

But if the seller had said no, and they backed out of the deal, their deposit could have been at risk unless the contract included an appraisal contingency that made the purchase subject to the property appraising for the purchase price.

Be aware that refinance appraisals don’t necessarily reflect market value. Sometimes a refinance appraisal comes in at a lower price than would be the case if the property was sold on the open market. When this happens it can prohibit a refinance from going through.

THE CLOSING: Refinance appraisals also come in on the high side, which gives homeowners unrealistic expectations of the market value of their home.

Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.

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