Profile picture for vintagelace

House appraisal didn't meet the selling price

When I made an offer on this house I offered what I thought was a fair market value and seller counter offered with his same asking price and I went for it in hopes it wouldn't appraise. It was appraised at $15,000 less than the selling price. My agent wants to know what I want to do. The seller is an investor. I have already given him a $10,000 deposit and it's in escrow. Can he decide not to sell to me at this price?
  • May 16 2012 - US
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Answers (14)

Profile picture for hpvanc
Have you officially informed the seller of the appraisal and that you are using the appraisal and/or loan contingency based on the appraised value?  The investor may decide to keep the property, or they may decide to cut their losses and sell it rather than rack up more carrying cost. 

Cindy is correct they may have that much invested, or could already be taking a loss at the contract price.  I know that is not your problem, but they took a risk and you took a risk, in this case you may both lose.
  • May 17 2012
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It may not be greed; he could have that much invested. However, I certainly hope that you and your agent created a contract that protects you.
  • May 17 2012
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Profile picture for vintagelace
Seller told my agent for me to put my best offer in. The appraised price is my best offer. I put $62,000 and don't have an extra 15,000. Besides I wouldn't give it to the seller anyway. I have already been given a date that escrow would close, started packing, purchased my appliances. why are people so greedy? 
  • May 17 2012
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Your purchase contract should outline your options. I can't overstate the importance of reading it.
  • May 17 2012
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Depends on how your agreement of sale is written. In PA, our mortgage contingency clause stipulates a specific loan to value ratio as part of the mortgage terms.  If the sale price falls below the offering price during the appraisal process, then the loan to value is now incorrect. Buyers also have the option of including an appraisal addendum with their offer to protect themselves in the event it doesn't appraise.  If it's an FHA loan, there's also a section of the contract that states that the home has to appraise for a specific price.  
Buyers, particularly in a buyer's market, rarely want to pay more for a house than it's worth so the option would be to have the seller lower the sale price to appraised value. If you really want the house and are willing to negotiate, i.e. offer to split the difference,then you have that option, however you'll need to bring more money to the settlement table which isn't an option for many buyers.  Good luck!
  • May 17 2012
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Profile picture for Ofe Polack
Two options pay or walk away.  First make sure you are within the period of time that allows for the receipt of the Letter of Commitment from the bank. Most contracts have a financial contingency make sure yours does too.  Of course you can also request another Appraisal.
  • May 17 2012
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David is exactly right, the Seller needs to lower the price or you should walk away. Why buy a home for more then the appraised value.
  • May 17 2012
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Profile picture for vintagelace
I have decided if the seller doesn't lower the price I am going to walk away. My downpayment on this 200,000 house is already $62,000 and I can't put anymore into it. Hope things go my way or I'll be out searching again.
  • May 17 2012
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It's up to you if you want to pay the difference.  You can always see if the seller is willing to accept a lower offer as the property didn't appraise to the value of the sale.
  • May 16 2012
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As was previously indicated we're assuming you have an appraisal contingency in place, and if so, I'd try to get a reduction from the seller.  If he won't go for that, and you want the house, then the question is can you afford to move forward if it doesn't appraise?  If not, then you have to look at what options you do have:
1-Can you request a revision of the appraisal?  If there are facts wrong, or if you can provide additional information maybe you can get the appraisal revised.
2-Can you request another appraisal?  Maybe not, so consider changing lenders if necessary so that you can get another appraisal.
3-Walk away.
Best of luck!
~Vicky (VickyChrisner.com)
  • May 16 2012
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David is correct, pay the difference or back out. Generally appraisers DONT lowball purchases unless there is no data to support your offer price. I have probably lowballed one appraisal in the past 1000.....
  • May 16 2012
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First what did your agent suggest?

Without knowing more details, I would request a price reduction to the appraised value.  If you're using an FHA loan, that appraisal will be attached to the property for the next 6 months, so any FHA buyer will end up with that value in all likelyhood.

Is it a new roof?  If so have him fix the issues, otherwise I'd request a 2 year roof certification at the sellers expense, to protect you from leaks and minor issues with the roof (unless he's willing to fix the roof issues).

But, you really should ask your agent for their opinion.
  • May 16 2012
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Profile picture for vintagelace
I really do love the house. The inspection came out pretty good except for a few minor issues with the roof. I could ask him to take care of that and provide all the appliances? Would that work?
  • May 16 2012
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Really you have 2 options.  One, pay the difference in full as your lender will use the lesser of the two values (sales price or appraised value) as your homes value.  Two, you walk away.  You should have an appraisal contingency in your purchase agreement allowing you to back out of the offer if the home does not appraise so that you are able to get your earnest money deposit back and walk away easily.  Personally unless you love the home, if it didn't appraise for the sales price tell the seller to lower their price or walk.  Good luck!

  • May 16 2012
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