Profile picture for user5313723

Appraisal being valued less than purchase price.. What if?

Im looking to buy my first home. Its in a cheaper area with houses in the next sub-division you can buy a older house for $100K... Im looking at a brand new neighboorhood because the taxes are much cheaper just a few blocks down (4%vs3%) The house im looking at building is going to run $165K.

She told me straight up that if I bring a realtor into the deal prices will go up. So im trying my best to do all my research.

My question is how can I avoid the house being appraised lower than the purchase price then have to come up with the extra down payment if that happens. The sales lady assured me that one happen but I know how sales people are.

Can I something in the contract that makes it OK to breach if the house is appraised lower than the purchase prices?

How can I protect myself from this? Zillow.com's "Zestimate" Shows houses 30-40K lower than the selling price.

Any advice would be helpful. I also asked to see the recent comps and she showed me a list of recently sold houses. They were all really expensive, from 170-205K... Was the list real? Dont know. 

If anyone would like to help. The neighborhood is called "Borden's Gully" and is located in Dickinson, TX 77539


THANKS!!!!!!!!!

  • June 05 2012 - Dickinson
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Answers (11)

Best Answer

1. Are you sure the taxes are lower because they tax rate it lower....or could it be that the taxes are lower because the are assessing on the unimproved value only?

2. You have no control over the appraisal so you should not even concern yourself with that aspect of the purchase.

3. If you're using a builder's contract you can rest assured the contract will not only be strongly in the builders favor, but it will also leave you with few ways out. If the builder contract does not have a appraisal provision that allows you to terminate the contract in the event the home doesn't appraise, then you will have to determine how bad you want the house and how much earnest money you're willing to lose if the appraisal comes in low.

4  Stop worrying about Zillow's estimate as Zestimates are seldom even close to what actual values will be.

5. If the builder's representative showed you sales comps, you can rest assured they were cherry picked to put the subdivision numbers in the best light. The builder's rep's job is to be as deep into your pockets as possible without scaring you off.

6. My advice is to treat this purchase from a logical perspective, not an emotional perspective. If the numbers don't look right and the builder's contract is too far in their favor (and they always are), the advise the builder to change the contract and if they refuse, walk away.

  • June 05 2012
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Profile picture for The LaPeer Team
Borden's Gully... 2 sold in the last 6 months substantially lower per sq ft than the ones currently on the market. One builder in the neighborhood. No re-sales only new home sales.

I'd be interested to see what price they are giving you to see how it compares to their listings on the mls in which they note the amount of real estate commissions they will pay.

BTW - you may not have a MUD but you have a WCID... pretty much the same thing.
  • June 06 2012
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Profile picture for The LaPeer Team
Don't worry about starting problems. Bottom line is that the builder wants your business and will usually do what it takes to get it. If you registered without naming a Realtor, chances are that the builder wouldn't pay them but you could. I have pulled comps for both buyers and builders in many subdivisions w/new homes. There will be some differences in pricing between re-sale and new, but you should try to get those comps from a Realtor and compare them to what they builder's rep gave you. Furthermore, appraisals are not the same as they used to be. With the new RESPA laws, a 3rd party selects the appraiser and the lender is not allowed to speak to them. Because of this, appraisers are not influenced/pressured by the seller/builder/loan officer to get a certain number.

Keep in mind that they need your business. If they are bribing you to go unrepresented with a lower sales price, they may be trying to hide the truth from you. If you decide to go it alone, be very careful. If you want someone to look at the numbers for you with no obligation, let me know. Pulling a few comps takes me minutes but can save you thousands.
  • June 05 2012
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Guy, That's great advice. Thank you. The tax rate is in fact lower due to not having MUD/PID taxes, compared to most of the other neighborhoods i have been looking at. I'd also like to apologize for all my typos in my original post, I was doing it from my iPhone. Thanks again
  • June 05 2012
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Profile picture for user5313723
I understand everyone's concern. But please let me handle this on my own. I do not want to start any problems. I just wanted some advice on appraisal vs selling price. Please DO NOT investigate this. I will get a buyers agent and let them know of what's going on.
  • June 05 2012
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Profile picture for hpvanc
If you do prefer to work with a buyers agent, you could go out of pocket and pay for it yourself.  If you can find one that has the credentials you need and want hopefully you could work out a deal to compensate them on a professional fee for services basis, instead of paying them a sales commission to allegedly represent you as a buyer.  That way they do really work for you.

I seriously doubt the builders agent gets to keep the full commission if you don't use a buyers agent.  I suspect the builders are savvy enough to negotiate a deal with their agents that does not allow them to double end the commission.  In fact I've even heard of situations where builders agents are actual employees compensated with a combination of salary and commission.
  • June 05 2012
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Profile picture for Ofe Polack
David is correct!  WOW!  a Realtor should never say that, she wants to keep the full commission and not split it with a co-broke.  Please get yourself a buyer agent, you need to be properly represented.
  • June 05 2012
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If you have a purchase price of 165k but it only get appraised at 140k the mortgage compay will not give you 165k to buy the house.  Things are a lot more strict now because of the mess they got themselves in to.  So, you will have to adjust the purchase price, which the seller eventually will if they want to sell...or you will have to figure out how to come up with 25k on your own on top of whatever down payment you have.
  • June 05 2012
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I for once I  agree with David on this..Under NO circumstances should you not use a realtor and yes that sales person should be reported.
  • June 05 2012
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Profile picture for hpvanc
Since you are in TX (non-disclosure state), purchase prices are a closely guarded secret.  For that reason I wouldn't worry about information on Zillow, but wouldn't take the builders representatives list of comps as fact either.  It may be worthwhile to pay for a consultation with a licensed appraiser to give you a better idea of values.  Also are they insisting that you secure your mortgage through their in-house finance company?  You will get more protection on appraised value if you use an outside lender, if they pressure you to work with the in-house lender I would move on.

Finally not all builders are willing to work with buyers agents, so make sure you have an attorney review all of the contracts and make sure you have sufficient protection if the house won't appraise.
  • June 05 2012
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Please give me the name of the "sales lady".  I would like to report her to the Texas Board of Realtors. 

She is lying to you because the cost of real estate commission is built into the price of a new home, whether you have a Realtor representing you or not.

Do NOT under any scenario use a Zillow zestimate to get "comps".  Zillow is not a licensed real estate broker and there is not a single mortgage loan appraiser at a bank that will use a Zestimate in a loan appraisal.   Zillow uses tax values from public tax appraiser websites and uses an arbitrary mathematic formula to arrive at a "value". 

Do NOT buy a home without having a Realtor represent you in this complicated real estate market.  The builders and bank short sales and foreclosures will use every trick possible to give themselves the advantage.
  • June 05 2012
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