Profile picture for DebraRitt

What should I do if the appraisal on the house I am selling comes in below the selling price?

The buyers are getting an FHA loan and the FHA appraisal came in $30,000 below our asking price, although it acknowledged that there were not a lot of comps in my area to compare it to.  Three of the two comps used to establish the value of my home have 4 bedrooms, while mine is a 5-bedroom house, and one of the homes sold almost a year ago (Sept. 2012), while another sold 6 months ago.  I am concerned not only about what that means on the current contract for my home, but that appraisal stays in the file for the next 4 months.  What recourse do I have?  Txs

  • August 02 2013 - Centreville
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Answers (5)

I would say to have your agent pull the most recent comparable in your area with the same school district radius and present them along with a challenge/appeal. I find that most of the appraisers are now using comparables that are closer to 12 months old and  staying with in a 5-10 mile radius of the homes location, instead of going back 180 days and going a little further in the radius of the homes location. They are playing it to safe.  Have your agent talk with the loan officer.  Good Luck   
  • August 02 2013
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Your agent can challenge the appraisal and find other comps to support value.
  • August 02 2013
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Absolutely have the listing agent challenge the appraisal and offer as many additional comparables and specific details about your home (any improvements, quality/name brand updates, receipts, etc.).  Every bit of information helps.  If the appraiser will not come up off the price (which I think is ludicrous considering they are using one comp that is 6 months old and one that is 1 YEAR old!), you'll have the following options (if the buyer doesn't decide to terminate which they have the right to do):

1. Reduce the price to the appraised value (which I don't recommend as it sounds as if this appraiser is using quite dated and limited comps);
2. Offer to split the difference between the sales price and the appraised value with the buyer (which probably isn't likely since this is an FHA loan and the buyer's funds are probably limited);
3. Have the purchaser come up with the difference between the sales price and appraised value (again, even less likely than #2 for the same reasons);
4. Ask buyer to consider an alternative financing option and give them additional time in their financing contingency to furnish another non-FHA appraisal (your agent can help in this regard if she has a good lender who could offer up good options for your buyers);
5. Agree to terminate the contract.

Obviously, this is not the buyer's fault.  They agreed to the sales price in the ratified contract but that doesn't do anyone any good if the lender is not able to justify the price.  I find it really hard to believe they are using one year old comps in Centreville, though!!!
  • August 02 2013
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Profile picture for Jon Petersen
 If the buyer is willing and able, you can ask them to make up the difference, or if they have the credit, they might even be able to go to a conventional loan to get a new appriasal. Many buyers wont do this, because they worry that the next appraisal will be low as well.

     The other option is to  cancel if you and the buyer cannot come to an agreement, and look for a conventional, va, or cash offer. If you want to do this, you should speak to your agent about the possibility of getting other offers better than the 30k price reduction.
  • August 02 2013
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I would write a letter challenging the appraisal. If there aren't enough comps that are close to that property, usually an appraiser will go slightly out of the normal radius to find a home more like the subject property. I would also make sure they have the correct square footage. You can always request another appraisal.
  • August 02 2013
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