Profile picture for user079945

Low Appraisel

I am buying a flip house.  One appraisel came in at 325 the other 300.  I am in contract for 325.  What does this mean.  Does the seller need to lower the price of the house?
  • April 02 2012 - Folsom
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Answers (8)

Having the lower appraisal give you some room for negotiating a lower price from the seller. Dont expect to get the sellers to come down to 300K but use the lower appraisal to your advantage and it could save you 10-20K if you are reasonable with the seller. Good Luck.
Michael Oliva
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  • April 03 2012
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The correct answer is, it depends on how you were buying the home in the offer, i.e. if you were buying with 20% down and if the apprails coming in at $300K does not affect the transactions i.e. the lender you may be stuck.

If on the other had you were doing any other kind of financing and the bank is relying on a $325 figure the you are off the hook and you can renegotiate or walk.  I do not know how your offer is written or what your down pmt is and so on.
  • April 03 2012
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If the lender uses the lower of the two, then that is what you have to go by.  You need to have your Realtor try to negotiate the price to $300k.  I wouldn't pay $25k more than a bank would lend.  Your offer is more than likely contingent on financing. The financing is based on a $300k value.  Either 1. the seller drops the price  or 2.  You bring 25k cash to the table or 3. You walk away.
  • April 03 2012
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Profile picture for Appraisal guy
You'll have to look at the comps and decide which comps are best and why there is a difference. I've appraised homes when I could pick comps to support $170,000 or $220,000 with very similar homes (cookie cutter). When the market is moving up or down at a fast pace, you'll see this. Yes, it is common for values to differ by 5% or more. Personally, I'd want to pay the lower value if I'm buying and the take the higher value when I'm selling. Start negotiating.
  • April 03 2012
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Profile picture for wetdawgs
Yes, it is common to have two appraisals 8% apart.   You've put your finger on a very important part of the "magic" of real estate valuation.  It is not engineering, but a use of numbers plus opinions.     I once had to have three appraisals for a corporate move buyout and the difference between the lowest and highest was >25%.

  • April 02 2012
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Profile picture for hpvanc
Are you trying to get an FHA loan.  There was another recent thread that the 2nd appraisal has to come in at 95% of the 1st for the FHA to fund the loan.  I don't think it is that unusual for appraisals to be close to 10% apart, yours are a little less than 8% apart. 

I would repost the question in the mortgage section in hopes of getting lenders to provide you with some more detailed information on the rules.  The seller can decide to keep the property.
  • April 02 2012
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Profile picture for user079945
I understand what it means, I guess I don't understand how 2 appraisels could come in $25,000 difference.  Is this common is probably a better question.  Is there usually such a difference in appraisels.  They were done 2 days apart.  Because this is a flip house the lender required 2 appraisels.  The lender uses the lower of the 2. 
  • April 02 2012
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Profile picture for wetdawgs
What does it mean?   Appraisals are opinions of value, you could have 5 appraisers and chances are very good the five would come up with 5 numbers.

Do you have a financing contingency in your purchase offer?   which of the appraisals was related to your loan?

A seller does not have to lower the price in response to an appraisal.  If the appraisal at $300k is the lender's appraisal, then it is a point of negotiation.   If the seller doesn't wish to adjust, you can (most likely) bail from the purchase and/or bring cash to closing to make up the difference.

  • April 02 2012
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