Appraisal Off by 70,000….Um What the Living F***

posted 3 years ago in Home
Post # 3
Member
2400 posts
Buzzing bee
  • Wedding: July 2013

@Irishb:  I can’t personally relate but it’s pretty common in our area due to very few good homes going on the market but alot of demand. But alot of buyers in my area are not financed traditionally- alot of private loans and owner will carry sales- so it’s not quite as big an issue as it is with traditional financing. So sorry- I do hope the new appraiser swings the valuation back up for you. Sometimes a new appraiser is all you need!

Post # 4
Member
7281 posts
Busy Beekeeper
  • Wedding: October 2011 - Bed & Breakfast

According to Case-Shiller, the market in most areas is now around 2005-2006 prices. So  if your seller is selling for more than 2006 prices, it may well be over priced.

That said, sometimes appraisals just suck. We were dealing with a short sale. The bank’s appraiser claimed the house was worth $50k more than our best  offer. We had already been in the market for more than a year at that point in time, and I had developed a very good ability to predict the sales price of a given home because I was so in tune with what was going on. I knew this was a $450k house and I wasn’t going to pay a cent more for it, regardless of what the bank’s appraiser claimed. Their appraiser was using comps that had high end finishes, full landscaping complete, and were in nice neighborhoods. This house was literally next to a tractor repair shop, had no landscaping (in fact the yard was caving in in spots), and had the most basic builder grade everything. yes, the year of construction and square footage were the same, but buyers in our area expect the best and I knew no one was going to touch the house in the state for $500k. needless to say, we walked away from that deal when the bank was just stubborn about their number. It ended up selling 12 months later for $47k LESS than we offered. I guess the bank finally got the memo that their appraisal was a worthless piece of paper. In short, banks are stupid and they get really stuck on appraisals, even if they are bad ones.

Post # 6
Member
3570 posts
Sugar bee
  • Wedding: September 2011

This happened to us.  The first appraisal was 59k low.  they kept telling us it was hard to appraise and there were no good comps, That it was priced correctly.  it was the cheapest thing we found in the area, and we could actually afford it. We loved it so we got another appraisal which came in 35k low.  The seller lowered the price but we decided to walk.  It was the hardest thing to do, but you don’t want to overpay for a home.  We were devastated, but two appraisals don’t lie.

Post # 7
Member
690 posts
Busy bee
  • Wedding: July 2012

I didn’t go through this personally, but a friend of mine did. I don’t know that their gap was quite $70k — I think it was more along the lines of $20k or $25k, if I’m remembering correctly. But anyway… The seller paid for his own appraisal, as it sounds like your sellers are doing as well. And it came back pretty much in the same range. The seller did not want to come down on his price, and my friend and her husband did not have the extra tens of thousands of dolalrs lying around to be able to cover the difference in what the bank was willing to finance. After LOTS of back and forth, the seller finally came down a little bit, but in the end, the realtors split the difference out of their commissions to get the deal done.

Post # 8
Member
3570 posts
Sugar bee
  • Wedding: September 2011

btw, it doesnt mean the sellers are in the red.  it means the house is not worth what they are asking.  People really overpaid for houses in 2006, and when appraisers were not independant, they rubber stamped every deal.  Now they are done by independant third parties, so appraisals are coming in low.  Sellers don’t want to lose on their house, and buyers don’t want to overpay. Someone has to take the loss.  In my mind, it’s the seller. 

You should be aware that the appraiser is there to protect the bank, and consequently, you.  When the appraiser decides the house worth, he is not trying to screw you.  He knows he is blowing up the deal if he appraises it low, and that is meant to protect you.  It sounds like the sellers overpaid for their house in 2006, and now don’t want to take a loss on it.  

You guys can try to rebut the appraisal (i wouldn’t do this – 70K is huge), pay for a second appraisal, pay the difference, or back out of the deal.  We went ahead and paid for a second appraisal before finally walking away.    If the appraisal comes in 70K low, that means the bank will only loan the appraised value.  So if it was 300K contract price and appraised at 230K, your mortgage can only be for 230 (minus your down payment).  You would have to come up with the addition 70K in cash!  If you are putting down 20%, you could probably put down less and put some of that cash into the portion that cannot be mortgaged.  One issue with getting an additional appraisal is that costs money and takes time, so you could potentially lose whatever rate you have your loan locked in at. 

 

Post # 9
Member
9253 posts
Buzzing Beekeeper
  • Wedding: September 2012

Something similar to this happened to a friend of mine.  She wasn’t in the red on her mortgage, in fact, her house was completely paid off.  Over the years she’d made a lot of improvements, and then put it on the market.  It appraised for $50,000 less than she was asking, but she still got offers.  She refused to lower the price to the appraisal amount.  Eventually the buyers that wanted it paid the additional $50,000, in cash, and financed the remaining balance that the house appraised for.  Sometimes houses are worth what someone will pay (or can pay).

Post # 10
Hostess
9919 posts
Buzzing Beekeeper
  • Wedding: May 2014

@Irishb:  my parents went through this back when I was in high school, we fell in love with a house that was perfect for our family.  They put in an offer, negotiated, had an accepted offer.  The appraisal came in way low – I don’t know the exact number.  The sellers refused to  budge and the bank refused to mortgage.  Sale fell through.  (very good reason to have a financing condition).

Post # 11
Member
6034 posts
Bee Keeper
  • Wedding: October 2014

Even with the realtor to help establish a realistic selling price, it sounds like the sellers are just asking too much for the house. My mother went through a phase where she had a different idea of the value of her home than what the banks thought, and her house sat on the market for over a year; she finally lowered the price (by about $90k) and sold within a week.  I would be very reluctant to continue in on the deal, even if the second appraisal comes in closer to the asking price, because it will take a very long time for the real estate market to catch back up and close that gap, leaving you very much at risk for being underwater for a long time, as a future appraisal is not guaranteed to come back in that higher price range (like if the 2nd one comes back $70k higher and you buy, what are you going to do if you want to sell at some point and can’t get the appraisal to work out?).

Post # 13
Member
941 posts
Busy bee
  • Wedding: April 2015

I hate appraisals. So often they seem to be based solely on “comps” in your area but don’t take into account what the inside finish of the house looks like. So, my 1994 (recently renovated interior) home would be compared in price to the 1994 same floorplan house down the street that sold 6 months ago but has never been renovated. 

Post # 15
Member
7281 posts
Busy Beekeeper
  • Wedding: October 2011 - Bed & Breakfast

@Irishb:  We pulled out of 3 deals before closing on the 4th. Looking back, we both feel like all of those failures were somehow meant to hold us off and keep us in the market until our house came on the market. Mr. LK calls it fate.

Leave a comment


Sent weekly. You may unsubscribe at any time.

Find Amazing Vendors