Profile picture for kathie16

My bank appraised a house we were going to buy @ $33k less than we contracted to pay.

Seller was not interested in negotiating a lower price - so we walked away. were we wrong, or should we have applied to another bank?
  • November 29 2010 - Ship Bottom
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Answers (19)

If the appraisal was indeed correct than I agree that you did the right thing in walking away. I think it is important to note however that all things must be considered before making a descision. There is a chance that the apprasier was wrong too...
  • January 03 2011
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how fabulous for you to have gained such insight before committing to the loan for more than it was worth
  • January 03 2011
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I would of done the same, 33k is a big gap. unless you need to live in that house their will always be another one better priced. this is a buyers market
  • January 03 2011
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I think to really answer if it was right or wrong, we would need to know the amount of the sale price...and really the question can only be answered by you :)

I have found that in many sales here on LBI, banks have wanted the house appraised twice and moreso on homes over $1 million. Some of the people they send to do the appraisal are just lazy and do not do their job. For example, there was a sale in my office recently on new construction. The first appraisal was fine but during the second, the appraiser measured only by foot steps (which led to the house being reported as 500 sq feet smaller than it really was (I guess he had small feet)) and the comps he used were for homes that were 15 years old. The point is, appraisals are an opinion of value and those opinions are subject to change.

Sometimes it pays to have a second opinion...
  • December 30 2010
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Hi Kathy,
That decision really depends on your financial situation & whether or not you needed it to appraise out at the sales price to get the loan approved or were just disappointed that it was valued less than your offer. If you are putting a large down payment well over 20% & the appraisal wasn't affecting the loan approval or monthly payment without you having to pay PMI  insurance then it would not have made a difference. However if you were putting down a lower down payment or going for an FHA or VA loan then it would have been an issue anyway. Most lenders use independent appraisers & they most likely will use the same comparable sales for the appraisal so  the appraisal is probably realistic & it doesn't pay to go through  that expense again for another loan appllication & 2nd appraisal.
It is unfortunate that the seller was not willing to work with you to keep the sale together.
  • December 06 2010
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In response to Charles, that's pure bull.  FHA appraisers are not "much more likely to under-value a property"...are you seriously telling your clients that so they don't use FHA financing???  In addition, the whole thing about appraisers being under pressure by banks so the bank re-hires them is also false.  Have you heard of the new laws in affect???  I have no choice over who gets hired to do my appraisals...my AMC choses.  

Kathie-if the seller was not willing to re-negotiate and the appraisal was good then you made the right choice to walk.
  • December 02 2010
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Profile picture for sunnyview
You did the right thing to walk away. 33K is too bug a gap to ignore.
  • December 02 2010
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Profile picture for Blue Nile
I see, so you are stating that if the offer says "FHA" it should just be rejected outright by the seller so that there isn't a bum appraisal to stay with the house, and so that there is a higher likelihood of the buyer actually being able to afford the house and to close escrow?

Better yet, why don't we just do away with all Federal Loans and all Federal Loan Guarantees?  They serve absolutely no purpose except to rip off the tax payer and raise housing prices.
  • December 01 2010
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Walking away was a good thing if the Seller is unwilling to reduce. If you applied for an FHA loan then that appraisal is earmarked to the property for any future buyers who want the property. If you really want it and it's FHA then you can submit lender documents to Seller to push for price using facts about appraisal. If seller doesn't budge then you've done all I think you can do. Find another.
  • December 01 2010
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Profile picture for wetdawgs
Is $33 k a huge difference, or a small percentage of the total cost of the house?  It might have been 2 or 3%, it might have been 10% - we don't know as we don't know the house.   

No seller is required to renegotiate, you had the decision with conventional mortgage to look elsewhere. With an FHA you (and future FHA buyers) are stuck most likely.   If this is continuing to bug you  because you are attached to the property (alas), talk with other lenders and see if you have a chance to pursue it if you aren't looking for an FHA loan.  Or, if really determined pay the difference in cash at closing.
  • December 01 2010
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One thing to note however is that if you are applying for an FHA loan then appraisers are much more likely to under value a property than with a conventional loan. Briefly put, appraisers are under much pressure because they want to be rehired by the bank, and are held very accountable for all estimates. This causes appraisers to be very cautious and estimate low to protect themselves and the banks interests.

In addition (assuming that this is an FHA mortgage), every time there is an FHA appraisal preformed for a house it is then attached to that property no matter who tries to purchase it with an FHA. This means that the next person to put an offer in on that house that has an FHA pre-approval, will also use that same appraisal. So next time have your agent approach the seller's agent and explain that there is a gap and that the appraisal is stuck with that property. Usually they will realize this and persuade the sellers to consider renegotiating.
  • December 01 2010
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Wow, 33,000 is a huge gap!


Your Agent did a CMA?  Did you ever feel that the price was high based on the CMA that your Agent performed?  Was there ever an inkling that you were worried that the home would not appraise out, or were you completely blindsided?

If you felt strongly that the appraisal was incorrect, you could have opted to pay for another appraisal (2nd opinion).

However, I can't get over the large gap.  33,000 is huge!

I think you made the right decision to walk away.  We had a similar circumstance happen in our field except the gap was much smaller.
The buyer was even willing to overpay out of pocket by several thousand dollars to make the seller happy.  The seller refused.  The buyers walked away.


Several months later, the seller's Agent contacted the buyers to ask if they were still interested in buying since the Seller had come to their senses and decided to sell it for the appraised value.  The outcome is still ongoing at this point.

Better safe than sorry in todays market!














  • December 01 2010
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You avoided a disaster. The seller is nuts if they are not willing to renegotiated the price after the appraisal comes in that much lower. Plus, that presents all kinds of problems when you attempt to get a loan. You would have to put more money down to make up for the equity which is not actually there. You made the wise choice by walking away. That seller is obviously very unrealistic. 
  • December 01 2010
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If its not an FHA loan..

If you really liked the home and thought that the appraisal was not accurate applying to another bank to get a new appraisal is not a bad idea.  We recently sold a home for $675,000 and it appraised for $625,000.  The seller had already reduced his price dramatically so he was firm and the buyer really wanted that home.  Everyone in the transaction thought it was a bum appraisal.  The seller offered to pay for a new appraisal from another lender.  The buyer agreed and the home appraised for $675,000!

  • December 01 2010
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Profile picture for Blue Nile
"IF all of that was done, then I am a bit surprised your agent didn't try to submit more accurate comps to fight for the value." -

Well, considering some Realtors® have been telling their clients to offer "full asking price" so that they can get their foot in the door and then when the appraisal comes in lower, negotiate a different price, I'm not surprised at all that it wouldn't be worth "fighting" for a higher estimate just so that the loan can be upside down sooner.

As for a CMA being within a few hundred dollars of an appraisal by a licensed appraiser in the area... absolutely ridiculous.  Realtors® are not licensed appraisers, and most of them admit they have less than 4th grade math skills!

Their CMA's are worse than Z-estimates!  At least Zillow gives the tolerance range for their estimates and the methodology, and what is included and excluded in the curve fit.

In a falling market, Realtors® are always estimating on the high side.  And they fully admit that they don't know how to properly appraise needed repairs, or even recognize the need for most repairs as they state they are not house inspectors, and to refer that to your inspector.

Walking away was the correct thing to do; but it would have been better to offer closer to market value in the first place, which means the buyer needs to be able to estimate market value better than any Realtor®.  (Caveat emptor is what those Realtors® keep telling everyone.  The buyer is responsible for everything and the Realtor® is responsible and liable for NOTHING!)
  • November 30 2010
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Kathie, Michael's response regarding FHA is completely correct.  I also agree with Jes that your agent should have known what the value would come in at...and, if the offered price was going to work.  IF all of that was done, then I am a bit surprised your agent didn't try to submit more accurate comps to fight for the value.

Certainly disputing an appraisal value will not always work, but it is certainly worth a try.
  • November 29 2010
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Profile picture for nwhome.us
You were placed in a difficult position. The appraisal should have been analyzed by your agent.  Given the changes made in the lending process, appraisals can be wrong.
It was within your options to require another appraisal from your lender; they had no obligation to honor a higher value.  An alternative is to have another lender order an appraisal.  If that had been more realistic, you could have switched lenders, subject to the cost of the appraisals.
All that being said; if the appraisal was reasonably accurate, you may have made the right move.
Do some more homework and make another offer if the research supports it.
  • November 29 2010
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You may have been able to apply with a different lender and may have got a higher appriasal. But a better question to ask is if the appriasal done was a good appraisal done by a competent appraiser. If the documented comparables were good and the value adjustments check out at the appriased value then why would you want to may more for a house then it is truely worth? Sometimes it is better to just walk away.

If you feel it was a bad appraisal then I would suggest the appraisal review as the agent below suggested.

If you were using an FHA loan to purchase this home then you are pretty much stuck with that appraisal. An FHA appraisal follows that house and no matter which lender you use that appraisal will have to be used. This also applies to any other buyers that may try that house with FHA financing.

I hope this helps some.
  • November 29 2010
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Hi Kathie,

Before submitting an offer on a property a client decides to purchase, I always do a comparable sales and see what the property is valued at, to see if it is near market value.  If you agent did this, what possibly happened was that the appraiser was possibly from out of the area or didn't do his homework.  You paid for the appraisal and should of requested a review.  That's were the comparable market analysis comes in (comps) to back up your offer.

If you go to a different lender it might be the same outcome.  Best bet is to get a comparable market analysis (comp).

Hope this helps,

Best regards,

Jes Sierra, B.Sc.
Realtor® 01772408
Century 21 Beachside

  • November 29 2010
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