Receiving a low appraisal on a home you are trying to buy in Hawaii can feel like a devastating blow, but it does not have to be a deal breaker. A low appraisal simply means that a licensed appraiser has determined the home is worth less than the agreed-upon purchase price. Understanding your options can help you navigate this common situation and potentially save you money.

The first option is to negotiate a lower purchase price with the seller. When an appraisal comes in low, it gives the buyer leverage to renegotiate. Present the appraisal report to the seller and request that they reduce the price to match the appraised value. Many sellers will agree to some price reduction rather than risk losing the deal entirely, especially if the property has been on the market for a while.

In Hawaii's competitive market, sellers may not always agree to a full price reduction. In this case, you can negotiate a compromise where the seller meets you somewhere between the appraised value and the original purchase price. Your real estate agent can help craft a compelling argument using comparable sales data and market analysis.

The second option is to make up the difference in cash. If you are financially able and truly want the property, you can bring additional cash to closing to cover the gap between the appraised value and the purchase price. Keep in mind that your lender will only finance up to the appraised value, so the difference must come from your own funds.

Before deciding to pay above appraised value, carefully consider whether the property is truly worth the extra investment. Factors like unique location, ocean views, or scarcity of similar properties in desirable Oahu neighborhoods may justify paying a premium. However, you should also consider the long-term implications for your equity position.

The third option is to challenge the appraisal. If you believe the appraiser made errors or used inappropriate comparable sales, you can request a reconsideration of value from your lender. Provide additional comparable sales data, information about property improvements, or evidence of unique features that may not have been properly considered.

In Hawaii, challenging an appraisal can be particularly effective because the island market has unique characteristics that mainland appraisers may not fully understand. Factors like proximity to beaches, views, and neighborhood desirability can significantly impact value in ways that are not always captured in standard appraisal methodologies.

You also have the option to walk away from the deal if your purchase contract includes an appraisal contingency. This protects your earnest money deposit and allows you to continue your home search without financial penalty. However, walking away should be a last resort after exploring all other options.

At Kristy and Austin Home Group, we help our clients navigate low appraisal situations with confidence. Our deep understanding of the Oahu market and strong negotiation skills ensure that you have the best possible outcome. Contact us today to learn how we can help you handle any appraisal challenges in your Hawaii home purchase.