What to do when appraisal comes low.?
FSBO (a CA agent outside of CA) overpriced house and had appraisal done, which came in much lower than expected. We made an offer, which was accepted. The appraisal our bank ordered came in the same as the one she did (5% lower than contract price), so we dropped our contract price to the appraised value of the house. Seller still didn't agree and ordered a third appraisal. All 3 of the comps on the 3rd appraisal were less than 3 months old vs subject property, which was 4 years old. And the subject house STILL came in higher than all of the comps on a $/sf basis. Can you see any good sound logical reason that we pay the higher appraised value for a house that was appraised on behalf of the seller (IE the bank won't use it)?
- dvskvLv 71 decade agoFavorite Answer
Some people are simply stubborn and I might add greedy esp if Seller is a licensed agent doing FSBO.
You did NOT even mention whether you got a Home Inspection which I would recommend bec as a Buyer, you want peace of mind that everything works & operates good and does not require repair and replacement since it is a lot of your hard earned money you are spending/investing. The Purchaser does pay the inspection fee like $300 (a lot times it will be based on a percentage of the purchase price) but the Good News is if something is wrong, normally there is a CONTINGENCY CLAUSE in a sales contract (oh, oh I forgot you let this shrewd Seller write the sales contract and he is keeping quiet so he/she gets the best of both worlds from an inexperienced Purchaser) that allows you the Purchaser to back out or at least settle how the Seller intends to correct the identified discrepancies...
Since the financial institution that you selected for your mortgage will not approve the loan since the Asking price is above the appraisal... My advice is go back and tell the Seller you will only proceed with the sale provided new contract or supplemental agreement to the existing one you signed: (i) lowers the price to not one penny over the appraisal AND (ii) not "OR" i.e demand that your legal right to the home passing a satisfactory Home Inspection.
BIGGEST THING TO REMEMBER is with all the existing homes on the market and more coming, You all have what is referred to as LEVERAGE and don't be afraid to walk out if the greedy Seller is a fool (note sometimes they are) and doesn't agree to a lower price and home inspection which might cause him/her headache. If you really want it and can't wait patiently & continue shopping around within selected neighborhoods, then it is possible that just giving up your right to home inspection might be the solution to lowering the price to appraisal.
My only question is WHY THE RUSH? BEST OF LUCK!
- 4 years ago
Since the whole Mortgage meltdown, there have been many new rules and regulations come down that lenders have to abide by. One of those rules have to do with the relationship between a lender and an appraiser. In the past there was a lot of fraud involving inflated appraisal prices, many times due to the lender pressuring the appraisers to come in with higher values. The lender cannot consider the appraisal your seller has had done. He is an interested party. Neither will it do you any good to have your own appraisal done - the lender cannot use it. Your lender really can't order another appraisal, either, just because he doesn't like what the appraiser came in with. Due to limited communications allowed, about all your lender can do is review the appraisal presented, and if there are blatant errors, such as comparables that are not comparable, about all they can do is request that the appraiser consider more or other comps, and see if the value comes up some. But, to be honest, in my experience, that doesn't often raise the value by a substantial amount. You are more than welcome to go to another lender, and start the process all over again, but you will be taking the chance that a new appraisal will come in low, too. We, as lenders, cannot pick and choose who we want to do an appraisal. We have a list of appraisers that are on our approved list, and, at least in our institution, we have to rotate them out in an impartial way, so often, it is the luck of the draw who does the appraisal. Many lenders have them ordered through a third party so they have no say in who does the appraisal. This is all due to fraud in the past. Hope this helps answer some of your questions.
- 1 decade ago
Since you are obtaining a mortgage to buy the house, there is only one appraisal that matters: the lender's. The seller is perfectly within his rights to reject the lender's appraisal and stand firm on his asking price. You, the buyer, are within your rights to offer less based on the lender's appraisal.
You have many options based on your desire for the house:
1. If the seller will not compromise, move on. Be sure to get your earnest money returned based on the lack of financing (and lower appraisal value). There should be a clause in the contract for this.
2. Provide the 5% difference in cash that your lender won't cover based on their appraisal. You must really want the house to do this.
3. Choose another lender with a different appraiser. Explain the shortfall up front. The lender will "shop" for an appraiser that will get the value, just like the seller did (by using the wrong comps). This is a dark cloud in our industry, but it is a reality. Somebody always needs the money who is willing to sell out their integrity. You must really want the house to do this.
It sounds like the seller is standing firm. Do you really want the house?Source(s): www.crosstownappraisals.com
- LandlordLv 71 decade ago
Your bank isn't going to accept anything other then their appraisers numbers unless you are making enough of a down payment to justify the risk. It is standard practice to only use the last three months and only within 1/4 mile of the house if they can get 6 houses in the equation. It is very possible that the seller over upgraded for the neighborhood, but it is him that eats that, not you or the bank. Make sure that they took lot size into account, larger then normal lots are worth more and that needs to be added.
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- Anonymous1 decade ago
Appraisals are only comps.So depending on what comps someone uses = the appraisal.Since the appraiser normally doesnt see the inside of every house they are appraising/comps there is play room with the numbers.Bottom line is a house is only worth what someone is willing to pay for it.Source(s): Bought and sold quite a few homes.
- Anonymous1 decade ago
There is another option. Get some figures for properties similar to the one you are buying.
If you can prove that the property is worth more than what is stated, then they have to change it.
You have to have about 5 properties that are similar not more than 3 months old.
I did it and it worked. Good luck!
- 1 decade ago
if he doesn't except your lower offer than move on. Its not worth coming out of pocket that extra 5% especially in a buyers market. He needs to stop living in fantasy world and accept the lower offer.