Appraisals - What if too low?

When appraisal comes in too low at closing, how do you deal with it? What are the options for the buyer and seller to get the deal back on track?
  • April 09 2011 - Midtown
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (15)

Jimmy;
The lender is only going to loan on a percentage of appraised value.
For example 90% of value on a 10% down loan.
There are several options when an appraisal comes in low.
The seller can agree to lower the sales price to appraised value.
The seller can pay for a second appraisal ( you don't get to choose the appraiser tho ).
The buyer can agree to pay the difference in cash at closing.
The buyer and seller can agree to meet somewhere between negotiated sales price and appraised value. The difference still has to be in cash from buyer.

Russ Andrews
Windermere RE/NCW
  • April 09 2011
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I agree with Russ. 
One other twist is that if the appraisal can be challenged the realtors may send in comparables (via the loan officer) for consideration.  I have had situations where that worked. 
ALSO ON A FHA loan ~ that property is tagged by FHA and if the seller is uncooperative in lowering the price and another FHA buyer comes along - everyone will see the previous low appraisal.  In the situation I dealt with that FHA appraisal made it be that truly the seller was stuck with the lower value and had to set his FHA sales price accordingly.
Sincerely,
Celia
  • April 09 2011
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for hpvanc
1st is there anything to substantiate your position that the appraisal is in error?  If so challenge it.  If you are challenging more than a very small fraction of your clients appraisals, see the next paragraph.

If not stop blaming the messenger, heed the message, and adjust to the current reality.
  • April 09 2011
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

If the appraisal was too low perhaps the selling price was too high.

The lender does not have to approve a 2nd appraisal unless there is compelling documentation that the first one was flawed.

How much too low?  The buyer and seller can split the difference.  The seller can lower the price.

As Celia pointed out - if it was an FHA appraisal that will attach to the house.  I believe it sticks for 6 months.  I'm not positive on the length of time. One of our FHA originators might know.
  • April 09 2011
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I am having a similar situation right now.. You can send in comps via the loan officer in order to send to the appraiser. In some instances a VA appraiser needs 5 comps but may not be able to find them, so the listing agent can send them different ones. Also, make sure the sq footage that the appraiser has is correct.
  • April 09 2011
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for SteadyState
REAs are always fond of saying that they are such negotiators, so why are they unable to negotiate the price down  even after an independent appraisal gives them factual data for lowering the price?
 
Russ offers three options that do not make economic sense:
1. Pay for a second appraisal - assume it come's in 5% higher than first - so what? Why trust the second appraisal over the first?
2. Buyer pays difference - this is the same as saying please overpay for your home so the deal goes through and the agents commission streams continue
3.  Buyer and Seller meet in the middle - again ask the buyer to overpay. Why?
  • April 11 2011
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for haddonfieldguy
The posters on this subject have not included a key element that can help: negotiate with the realtor to lower their commission. I'm in this situation now and the appraisal is 40k lower than the sale price. 30k of that is in commissions, so the realtors need to step up and help meet in the middle. They can split up 20k, or get $0.
  • June 02 2011
  • 2Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for cmg12
This depends on if your the buyer, the seller, or the bank.   The buyer of course does not want to pay more then a house is appraised, the bank doesn't want to give out loans that aren't secured by property, and of course the seller doesn't want the price to change at all.  Ideally this can all be avoided by properly pricing a home in the first place.  However, this does happen in which case some modifications may be in order. 
  • June 02 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

This is a current growing epidemic right now.. The market in my area is rising however appraisals are based on past sales they are making no adjustment for the current market upturn...
  • September 13 2012
  • 2Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for sunnyview
I think it is the HVCC system where out of town appraisers write paper for areas that they have no personal knowledge of at all. It is not a good professional model.
  • September 13 2012
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for gatorbill
has anyone had experience with VA backed loans? im a buyer working with a seller who has a VA backed loan through wells fargo. our appraisal came back $15K under the agreed purchase price. and addendum for the appraised price was sent to the VA via wells fargo. why would this happen? did the VA do the initial appraisal? thank you in advance for any info you can provide.
  • September 13 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for user91109066
I know this is an old thread but it indexes high on Google search, so it's easy to find. How about when there are multiple bids on a home? Our home in Austin was priced appropriately, but multiple buyers were willing to go over 10% above, and we had 11 offers in the first two days. Do appraisers take into consideration the number of offers (demand) for a specific home? Comps will not make our case. Any advise before the appraisal?
  • March 26 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Unfortunately, I have not seen an appraiser weigh the 'supply and demand' concept into their calculations. I am currently dealing with a similar problem and the appraiser simply wouldn't hear the 'market improvement' argument that I made; all that was added to the comps was 3% for the yearly appreciation (which is their standard and max). However, as many of us know, a home's value can raise a lot more than 3% in a given time-frame for many reasons. I think appraiser would rather come in low on their estimate than high due to liability issues with the lenders. This is not to say anything negative about appraisers. In fact, I have read some articles about the appraisal guidelines and standards and they are heavily sanctioned for their work. 

The only advice I can give you is at least make your appraiser is experienced and well versed in your local market. Often times, the person doing the appraisal has no idea about neighborhood factors, etc. e.g. the one I communicated with was from the Clear Lake area and the home was in the Rosenberg area of Fort Bend. To my dismay, this is the best advice I have. Also, keep in mind with FHA appraisals they do stick with the house (not sure how long) and even worse, if another appraisal is done the FHA will always choose the lowest of the two (not the average). Best of luck, Jaymes
  • March 28 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for user966878
curious if anyone is aware of examples or has had experience with seller agents lessening their commission due to an appraisal coming in under the listing price. is this something that should be considered by the agent, especially if they did not prepare an appraisal package for the appraiser? not to mention they were not present for the appraisal.
  • May 28 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for wetdawgs
@user966878:  This is a 2 year old thread, you may benefit from starting a new one (click on the blue button 'post question' on the right of the page)

My personal observation is that I've seen agents toss in a few dollars related to repair costs (less than 0.5% of sales price) but not related to appraised value.    

It sounds like you expect  that the agent  has more control over  appraisal value than allowed by the "Home Valuation Code of Conduct".    Google it to see what lenders can and can't do.  If I remember properly, one of the no-nos is providing the appraiser with a list of comps or other actions to influence the appraiser.

  • May 28 2013
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.