Profile picture for user4275626

house appraised at offer-price and lender does not agree

I can't find a scenario of this anywhere on the web. Offered 240k on a home and it was accepted. Proceeded with the loan approval process. I qualified for 30 yr fixed. Put 20% down on the loan. Then the lender came back and said they did not agree with the appraisal. They think the appraisal is 20k too high. Lender is based out of another state. Appraiser was local and hired through the lender's AMC. Because the home appraised at the offer price, I don't see how seller would agree to lower the price. Any thoughts on my options?
  • October 19 2013 - US
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Answers (13)

Generally if the comparables are hard to support the value and an AVM is pulled to help justify but then exceeds the tolerance, it would call for a desk or field review for justification. If the addition was not legally permitted it could result in further issues, if it was and that is the contributing factor to the main question then the desk review would need to justify if the comps were the best used. You should ask your current lender what there policies are for secondary appraisals and if that would be an option in the event if the desk review was unfavorable. As much as I like to promote using local lenders, I would not point the fingure at the out of state lender.

If the AVM is much lower you may be able to get a copy and try to re negotiate with the seller if the appraisal is still unacceptable.
  • October 20 2013
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Profile picture for wetdawgs
The mother in law suite is an important fact.   Is it a legal unit?   
  • October 20 2013
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Profile picture for user4275626
Thanks everyone for your input. Part of the issue is this home had an addition built on to it - a mother in law suite. There's no comps in the area to compare it to. Also, the situation with the lender is bizarre but I don't think they are doing anything wrong, just following their processes. I went with this lender because an old classmate of mine works/worked for them and had done several loans for other classmates. He lives in the area of the home I am trying to purchase. His company has/had a branch in my state. Halfway thru the process his affiliation/employment with the company ended or was being phased out and another loan officer took over. So like I said, bizarre, but I'm not sure if anything was done wrong or questionably. Ugh.
  • October 20 2013
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Profile picture for goodmortgage
The culprit could be the comps used in the appraisal.  Just as someone else said - the underwriter may have raised a red flag if the comps used were questionable in determining the value of the home.  It should really have nothing to do with a lender being "out of state."  At the end of the day it is up to the underwriter to clear the loan for approval, and although this is highly unusual - I would ask why they felt the value was so "off."  You deserve to know.
  • October 20 2013
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Profile picture for Rebecca Marvel
First problem I see:  Why are you using an an out of area lender?
  • October 20 2013
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Sorry to hear you are having trouble.  Before doing anything, I would get as much detail as to "why" the lender thinks is worth 20k less than the appraised value.  Then I'd compare that to the actual appraisal and see if it makes sense as to why.  Depending on your findings, I would try to negotiate with the seller again.  The seller may not want to risk having it on the market longer due to the next appraisal possibly coming in lower and carrying costs.  ....like Tim and Rachel say, it could be a win-win if you and the seller can get it worked out even if seller doesn't lower all of the 20k.

Fortunately these situations don't come up that often...also agreed, local lenders will usually provide you with more personal guidance in these situations.
  • October 20 2013
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Why does the lender have an issue with the appraised value?  I have had situations where apprasials were not able to be completed with comparable sales.  The appraiser stretches what is a comparable sale to arrive at a value.  The underwriter can review an appraisal and determine that a comp from a property 6 miles and 2 towns away is not really a comp.

I woulld have a conversation with your lender and ask why they won't accept the appraised value.
  • October 19 2013
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Profile picture for Outer Banks N C
Contracts don't expire, the closing date has passed but that does not mean the contract is expired. Unless terms like "time is of the essence" are used the closing date is a goal, not a drop dead date.

Go for it - hang in and don't roll over. Avoid screaming and DON'T make threats or use words like suit or lawyer as that can make the process stop. I bet they roll over.
  • October 19 2013
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Profile picture for Neeraj Jassal
That's terrible - so sorry to hear about this.

This has happened to a friend of mine who also used an out-of-state "internet" lender.  Everything in the transaction was moving along fine until two days before closing when the lender performed their own appraisal based on an MLS study and came up with a shorted value.  He called me at the time it occurred and I suggested he find a way to postpone closing until he can get an approval from another lender.  They were somehow able to work it out but not without major nail biting and hand wringing.  

You may also have to consider finding another lender if they do not issue approval.  The difference between my friend's scenario and yours is that they are in opposite economic climates - in his case, the market had declined and the lender performing a last minute check was almost justified.

Good luck - and please keep us posted.
  • October 19 2013
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Your situation is why we always suggest that our Buyers choose a local Lender. But, we suggest that you ask your Lender to order another appraisal ASAP.
  • October 19 2013
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Profile picture for user4275626
It came at the 11th hour. Right before closing. They ran an amv and now they've ordered a desk review. The contract is now expired but seller is still interested in continuing to work this out.
  • October 19 2013
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Profile picture for Neeraj Jassal
At what point did the lender discern that the appraisal was too high?

Did it occur right before closing or did it happen earlier in the transaction?
  • October 19 2013
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Profile picture for Outer Banks N C
That's a new one for me. I have only 25 years experience so I have never seen that before. Hopefully the lender will come to their senses. Good luck with this one. I would say to ask for another appraisal but you darn well should not have to and I sure would not be the one that paid for it if you do another. What would the seller do if it was $20k too high? Maybe it could be a win win for you if they dropped the sale price.

tim
  • October 19 2013
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