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What to do if the appraisal comes back higher than comparables

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Molly and Sadie

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I placed an offer for a short sale 6 weeks ago.The bank did not want an appraisal. Now what I offered is higher than comparables in the same neighborhood.  How do I handle this with the bank who is selling the house?  Mylender is making me do an appraisal-what if it comes back higher or at what I offered even though the comparables with in one block are 40,000 cheaper.
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July 17 - Daytona Beach
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2005jjt

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If you jumped the gun and you bid higher than property is worth you will have to pay the extra amount. The issue is no bank will give you a loan for more than the properties fair market value in these market conditions. You could pay cash or walk. In the contract there should have been a finance contingency. Also If you give them the appraisal they may lower the price to market. Sounds good but doubt it....
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July 19
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Linda Strasberg, "L Strasberg"

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have they countered your offer yet?
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July 19
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Randolph Kinney, "r_kinneyr"

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Contracts to purchase a short sale property are contigent on the bank's approval to agree with the terms, conditions and price of the offer.  That is the bank that is holding the current first mortgage and any additional lien holders on the property that will be affected.

The new lender for the buyer and the old lender for the seller are interested in current "market value".  The purpose of the appraisal will be to determine market value for a mortgage finance transaction.  Market value is defined by Fannie Mae.

The the most recent, most proximate, most similar properties are the comparable properties that will be used to determine market value, after adjustments.

If the bank who holds the mortgage agreed to your terms, conditions and price before the appraisal, they are duty bound to support that.

Your lender may not agree with the opinion of value expressed by the appraisal they ordered.  They may find fault with it and order a new appraisal or they could just cut the value they will loan on.
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July 19
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Maria Morton, "MariaMorton"

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If it comes back higher than what you offered, you're okay. If it comes back lower than what you offered, the bank will only lend you a percentage of what the property appraises at. You will have to come up with the difference to complete the transaction.
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July 19
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Spec_T

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well hmmm.  I have to make a few assumptions that you werent clear on.  You signed a contract with the current owner ?  If that is the case in the process of a short sale the bank will likely do a BPO on the house shortly before they are willing to come back to you with the amount they will accept for the house.  Did you use a FARBAR contract ?  if so what is the term ?  did you use any contingencies ?  unless you wrote in a long period of time on the contract it is likely no good at this point and you can walk.  My first piece of advice is that you need to get an agent that knows Short sales  inside and out.   The Short sale  process is not easy.  There is a lot to know and learn.  All banks handle them differently.  Some will approve in weeks  while others take months.

I am not an agent  but  i do know  a fair amount about the short sale / foreclosure process.  If you dont want to post the details here, you can email me the info and I will do my best to help.  I am in Orlando
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July 18
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Lisa Reeves, "Lisa Reeves"

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Real estate is constantly changing - as you can see with the recent market.  Unless you are planning to resell your home in the next six months to a year - you will recoup any difference that you pay for your home and the comparables one block away.  You must also understand that the comparable properties you are looking at - whether through trulia or zillow are not always considered true comparable properties.  Appraisers must follow certain rules when they put comparables in their appraisal.  The bigger concern is for you is if the property doesn't appraise.  If you had a tough time negotiating your current offer - then you will have to do it all over again.  Don't sweat what you are paying for a home right now because it is on its way up from here.  Good-luck.
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July 18
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Kimberly Brandon, "KimberlyBrandon"

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If I understand you right you are worried that the appraisal your lender has ordered may be higher? than the contract price?

If I understood correctly - that would be a great thing.  The seller - regardless who it is, a real person or a bank will not know the appraised value.  That is between you and your lender.  The only time the seller's become aware of that number is if the appraisal is lower than contract price.  In this market if you get an appraisal over contract you have made a really good deal and congrats...

If the appraisal comes in lower than contract - hopefully you have a financing and appraisal contingency in your contract.  If you have a contingency that the property must appraise for at least contract price and it does not  - usually once the seller has been made aware of the apprasial and in some cases received a copy of it - they will agree to reduce the sales price to appraised value. 
The logic is if one appraiser has determined the value to be X so will another appraiser.  And no one can expect a buyer to over pay for a property.
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July 18
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mysql

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usually you have to come up with the difference in order for the lender to play ball. otherwise, you go to the seller and ask for the price to be lowered.
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July 18
 

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