Received a low appraisal from bank, now what?

14 years ago

We put in an offer to buy an investment house (short sale). It was accepted by seller and we did a contract and put $1000 good faith money. Then it was appraised for $20,000 less than the asking/contract price! Our agent is unable to find any comps in the area (truly). I tried as well and NONE! So NOW what? We absolutely positively want that house and need to get it ASAP as we have renters ready to move into it! The bank is telling us we need to put more down on it and we feel like we are being jacked around. Why is the price so high if the appraisal is so low? WHO do we ask? What's our recourse? We are tempted to just pay cash (which we can do). We are so aggravated over this whole deal. WHAT do we do? Thank you for your help!

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Comments (15)

cordovamom
14 years ago
You can go back to the seller with the appraisal in hand and renegotiate a 20k drop in price, or ask them to meet you half way by 10k. Since it's a short sale this may take a while. Or you can come up with the additional down payment. I had one of my previous homes that appraised for under the contract price, lucky it was only by 1K, we came up with the extra funds because it was worth it to us. Had it been by 20K I think we would have walked if the seller couldn't bring down his price.
terezosa / terriks
14 years ago
Getting an offer accepted by the seller is often the easy part of a short sale. Getting bank approval can be a whole other story. Short sales take time, often lots of it.
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It was definitely an appraisal, not a CMA. Our agent paid for it. She suggested it because of a home they sold where the contract price was about 50K more than the first appraisal. They paid for another appraisal that was still 20K less than the contract price. So they got nervous and suggested that we have one now to avoid that scenario. The reason that homes currently on the market were used was because of the lack of sold comps, I guess. We have a 2 story house, and there are more single story homes in than 2 story in our area. However, we don't agree with how the appraiser picked and chose between both sold comps and listed homes to justify her result. I told my agent it looks like circular reasoning. We are just listed, with no sales contract or offers. Apparently, with a signed contract, according to the appraiser, she could go up $20K, which is still 50K from our asking price. Single stories in our area are selling for $425-490. The biggest single story is 3100 sqft, and our house is 3500. Our lot is one of the biggest in the area. I understand that square footage on the second story is discounted but how can our house appraise less than a 2500 single story on a smaller lot? No one had mentioned that we were unrealistic about our price. In fact, our agents originally had said we could list a bit higher if we wanted to. We are 30K lower than another house of same floor plan, and 12K higher than a second house like ours. We had two agent's tours, and out of 40 agents only 2 commented on the price possibly being high. The rest rated the price as "good".
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If you invest 100's of thousands of bucks to 'only' make 6-8% return in a business.....you have 'no' clue how to make money. It's NOT an IRA or 401K. I have 3 degrees all in business I also have several business degrees, including a PhD, and spent a lot of time in a real business making real profit before becoming a professor. My advice to you is to seek a tuition refund. The entire S&P 500 only makes an average of 8.6% profit. The average for retail is only 4.4%. The average profit margin in the construction industry for publicly traded companies is only 7.1%. Furthermore, and even more importantly, it doesn't matter how profitable G.C.'s are. If G.C.s can make so much money what incentive would a G.C. have to make less on your job? You claim to have three business degrees but don't seem to understand the basics of supply and demand. Just because someone is in a profitable industry doesn't mean you get to pay less. Run right into the Mercedes dealer and let them know that what they charge is highway robbery and give them a check for what you think they should charge, then get in the car and just drive off. Let me know how that goes for you. How much the G.C. makes isn't relevant to your decision. All that matters is what you could get it for somewhere else. -------------------------------------------------------- To the OP and anyone else in this situation. Don't ask a G.C. who you trust to reduce his profit, not because he will not, but because he just might do it. Here is a helpful hint for being a client, be the client that you would want to have. I strongly believe that the best houses are built when the G.C. and the homeowner look out for each other rather than everyone trying to get as much as they can. Don't start the game of trying to get one over on your G.C. to save a little bit of money, because the G.C. is better at that game and once started the homeowner almost always loses.
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Linda
14 years ago
Your bank is protecting your and their interest with that appraisal. Why would you want to up your offer to pay more for a house where the value isnt there? Make another offer to the bank for appraised value. It is what it is.
phillipeh
14 years ago
$20K is a lot of money. Even if I was able to pay cash, I would try to renegotiate the price. It will take you some time to recoup that money from rent, not counting what you might need to pour into it to fix it up.
polie
14 years ago
From everything I read, banks have gone from one extreme of greed (lending to anyone with even a faint heartbeat) to the opposite extreme of fear (being super strict). Similarly, in a flat to declining real estate market, appraisers have gotten conservative with their valuations. As others have mentioned, you have been approved for a mortgage, but (if the Seller refuses to lower the price) you will need to come up with another $20,000 to add to the down payment. Good luck!
brickeyee
14 years ago
"Why is the price so high if the appraisal is so low?"

Because you failed to bargain for an appropriate price.

Sellers can ask whatever amo9unt they want, no one is required to pay the asking price.

If you really want to dig a hole but believe you can get out, have the seller hold a second for the $20,000.
Billl
14 years ago
"Why is the price so high if the appraisal is so low?"

Either you bid way too high or the appraisal stinks. Find out what comps the appraisal used and see if your realtor agrees that they are comparable properties. When we refinanced, the lender through out the first appraisal because some of the comps were way out of line.
polie
14 years ago
OP, any response from either the bank or the seller?
annie1956
14 years ago
We are in the opposition position (sellers). Have a contract to sell at one price with the appraisal coming in $10k less. The buyers said they could only go forward if we reduced everything down - we were giving them a new roof & $6500 closing costs. During the home inspection THEIR home inspector stated that the roof was good for another 5 years (it should be - it's 20 yrs old on a 25 yr roof). So we countered back on the appraisal that we would accept the lower price but pulled back the roof and dropped the closing costs to $3250. It's been a week and we just heard that they STILL want the roof and $4500 closing costs. (i.e. I feel they don't want to give up anything - this roof will cost us a good $6k - it has to be stripped and a new one put on). So now what? I really want the sale, hate to play "hard ball", but then again, feel like I'm being taken for a ride - having to have a roof job done on a house that doesn't need it. Attorney suggested maybe dollars towards a new roof? We've already completed most of the repairs on their punch list from the home inspection - and they know it - so they know we are trying to get everything in order. It's a good house.
jane__ny
14 years ago
If it were me, I wouldn't do it. Let them walk if they want to nickle/dime you. I guess its up to how fast you need to sell. It is Spring and showings should increase.

Jane
annie1956
14 years ago
Thanks Jane - problem is - it's Mom's house, she died in September so we do need to sell it. We don't want to keep paying carrying costs on an empty house. We were very fortunate to get an offer (actually 3) 6 wks in and this one was full price (then minus the roof and closing costs).
What DH & I decided last night was - no roof, but we will give them an additional $2000 towards any repairs they feel are necessary - this will include the remaining roof repairs they requested - attic ventilation fan [no longer works - they wanted replaced], flashing [possible leak], vent pipe [they just added that in - no leak on them]. Or they can save it towards a new roof in 5 years.
This will bring them back up to their original $6500 closing costs - that's it. If they don't like it. They can walk. So I guess we'll see what happens. I feel like we're being quite flexible. But in this day and age - who knows.
lyfia
14 years ago
Annie - it sounds to me like ya'll were reasonable and if you got that many offers then it is likely you can get other offers too. I hope your counter works out and this is it for you.
mcguiness51_sbcglobal_net
13 years ago
I am buying a house in Las Vegas, Nv. We offered $120,000 about a month ago, at the time the comp's where about $130,000, but we are concerned with this declining market that it should be lower, what can we do?
Check the comp's
brickeyee
13 years ago
"what can we do? "

Put more down to keep the mortgage % at the same level.
pamghatten
13 years ago
Maybe now's not the time to buy a house in NV if you aren't going to stay in it long enough for prices to rebound some?

Received a low appraisal from bank, now what?

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cordovamom

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