Don't panic. Usually this issue is addressed in the purchase agreement. In the purchase agreement used by most Las Vegas real estate agents there are four things that can happen.
- The seller reduces the price to meet the appraised value.
- The buyer comes out of pocket with the difference between the appraised value and agreed price.
- The buyer and seller meet somewhere in the middle of the appraised value and agreed price.
- The buyer and seller can't agree and the contract is cancelled. Buyer gets their earnest money deposit refunded.
The thing to remember is that the seller doesn't have to agree to reduce the purchase price. In addition, if the seller does agree they could offset the reduced price by reducing closing cost contributions. Sometimes you will find a seller that doesn't budge. Then it is up to the buyer to decide: come up with the difference or walk away.
Also, we can always go to the underwriter if there is a concern about the appraisal and have them dispute it (which generally doesn't go very far, but worth a try anyway).
Be careful when you sign a purchase agreement to make sure you have not waived your appraisal contingency. Waiving the appraisal contingency means you agree ahead of time to make up the difference between the appraised price and the purchase agreement. Your lender will not loan you more than the appraised value of the home. This type of waiver was common when our market was hot. I have also seen it a few times lately as well.