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Profile picture for whizkid Bay area

Appraisal came lower than offer price by around 20k- What next ?

My initial lending company was a large Financial org and the appraisal that they arranged for did not appraise it to the offer price. Agent recommends going through a Mortgage broker from a Mortgage company, who I am told will get Appraisal done from a group which is much more familiar about the local market and has every chance of appraisal coming in @ offer price. Please advice  
  • May 06 2014 - Milpitas
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Answers (12)

Just appraised a (refi) property at $560K after borrower just tried at BofA where it came in at $470K via a Landsafe appraiser... I suggested the borrower ask to get their $$ from BofA back for the lousy job the appraiser did or they should report them to the BREA.

That scenario - thank god - is NOT common but it does happen.

  • May 07 2014
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hi, establish if the appraiser did or didn't do a good job in determining appraised Market Value, then try and negotiate the difference with the seller...$Good Luck$
  • May 07 2014
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Profile picture for Blue in d Nile
Wiz, Kid, as we have absolutely no clue what you are buying, how much you offered, how long you have looked, how well this one property meets your needs and desires, how much the property is worth to you, how many other people are interested in that property, what other properties are available, what other resources you may have, what your time frame for moving is, what other options you have for locations to live are, what the rental situation is in your specific search area... NONE of us can tell you what might be "best" for you in your specific situation.

As already mentioned, you really only have 4 options, and you really need to review those with your agent, your loan officer, and your family.  Nobody can make the decisions for you.

The only options are:
1) exercise your funding contingency and walk away from the contract.
2) try to see if the seller is willing to accept less
3) Come up with extra cash to still meet the required Loan to value ratio
4) Try to get a revised appraisal or other appraisal

Whether any appraisal is "right"?  That is only conjecture.  There is no such thing as right or wrong; it is only an opinion based on the available data.  Markets can change quickly.  Your opinion on value can be entirely different.  So could the next buyer.  The seller doesn't have any obligation to sell for less than the agreed price.  And if you walk the seller doesn't have any obligation to sell at all.  Maybe it is a good deal.  Maybe it is not.  None of us know because we don't know what you are buying nor for how much.
  • May 07 2014
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When an appraisal comes in low you have a few different options. You can pay the difference between the appraisal and the offer price. Your Realtor and the listing broker can team up to appeal the appraisal if they believe the appraiser is not local, and/or using bad comps. Your Realtor can attempt to renegotiate the price with the seller and listing Broker down to the appraisal amount or close to it. (if you are in a competitive market or there are multiple offers on the property negotiating the price drop is unlikely to work. Also if the price drop is large enough the seller may opt to just go back on the market at that price or one close to it.) Here in Washington state our contracts stipulate that the buyer MUST obtain the sellers permission prior to changing lenders or loan types or the deal is dead automatically. The buyer changing lenders has to start all over in the lending process which may also delay closing. Additionally, having a new appraisal does not guarantee it will come in higher. Good Luck! -Kjell
  • May 07 2014
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Profile picture for SteadyState
Think in terms of maximizing your situation. Getting another appraisal is like playing Russian roulette - eventually you will shoot yourself. Why another appraisal? Because your  selling (buyer's) agent is under contract to the listing (seller's) agent to sell you the house at the maximum possible apprised price?  If I were in your shoes I would tell the seller - take $20K less or I walk.
  • May 07 2014
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Really, Tyson, you wouldn't? I sure would. I would never let a low appraisal get in between me and a good deal if I could help it.
  • May 06 2014
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I would give you the advice that I give all my clients. I would not pay more for a house than the appraised value. I don't feel the lender is in question (as it was mentioned in other responses) b/c we have to use appraisal management companies using appraisers in the area of the home. I would question the realtor for not pulling comparable homes to make sure what you were offering was a fair price for the area.  I don't want to jump to conclusions b/c there are bad appraisers in all areas of the US as there are lenders, realtors, etc.
 
Your realtor has an opportunity to dispute the appraisal by providing at least 2 additional comps illustrating the value of the purchase price. Please keep in mind the comps can't be more than 90 days old, has to be like comps, and no more than 1 mile away. If there are comparables directly in the neighborhood you are buying these can't be ignored as these comps illustrates the direction values are going w/in your housing community. If you need further information please reach out to me here on Zillow or post on this thread so others will learn from your experience.

  • May 06 2014
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You should first ask your lender if they have a department where you can submit a rebuttal to the appraisal by submitting additional comparable sales data to support the higher value if your Agent or the Listing Agent can provide them. Both Agents should be able to determine if the appraised value is accurate based on the comps and adjustments utilized in the report or if there are better comps to support $20,000 higher. If the Agents can confirm that there is available data to support it then first try this with the current lender. If they will not reconsider value based on additional supporting data, then your Agent may be correct in that using a different mortgage company may be the next option for you. Appraisers get a copy of the purchase contract and know the sale number that needs to be achieved for the transaction. They should be doing everything possible to pull the necessary comps and data to justify the number unless they just are not there. There also can be appraisers that are just overly conservative and/or use Short Sales & Foreclosures instead of Traditional Sales that are recorded. You really need to work with a Mortgage Professional that can assess this at application so that entering in to a new transaction doesn't end with the same result. In addition, you need someone that will fight for you if/when situations occur on your loan transaction!!! I am so sorry you are experiencing this issue. If you have any additional questions or need further help, my contact information is available on my profile. All the best!
  • May 06 2014
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Your agent might be putting you at risk without realizing it   Appraisals are now done by an appraiser that is sent by an appraisal management company.   If your previous lender was going for a FHA mortgage it doesn't matter how many more appraisals are done, that appraisal stays with the house for 6 months.   Way better to negotiate the sales price down to the appraised price or move on to another house.
  • May 06 2014
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I would first ask your agent if she or he could provide your current mortgage lender with any additional sold comparables (in pdf form) which the lender would then forward to the appraisal managment company who ordered your appraisal.  Maybe the appraiser from outside the home's area missed a comparable.  Although a 20k swing is fairly substantial. 

When compared to a large financial org as you mentioned, a local mortgage lender's can typically order appraisals from a more local appraisal management company who will have local appraisers who will know your area better.  Some areas of a town may not be comparable to other areas of the same town. Your agent is correct on that.  Try with the appraisal rebuttal process above first  before starting over with another mortgage lender.   Good luck!
  • May 06 2014
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Appraisals can be difficult and a 20k difference could be a lot, but if you are trying to get a loan done, we are a broker and work with a lot of appraisers who are very familiar with the bay area. I just did a loan where we were able to submit some comps for the appraiser to consider in their valuation of the property. I would be happy to help you out. Feel free to reach out to me if you have any questions. 
  • May 06 2014
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Profile picture for Brian GFL Capital
i see four options
 
you can start the refinance process all over again with a mortgage broker and order a new appraisal
you can order and pay for another inspection and hope the value is there 
you can bring the difference as additional down payment
you can ask your real estate agent to renegotiate the offer based on the appraisal report
  • May 06 2014
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