Profile picture for k252740

what happens if the appraisal is higher than my offer?

I put in an offer on a home and it was accepted.Since its a short-sale the bank would like to do another appraisal. I am afraid that this time around it will get appraised at a higher end and I will not be able to afford it.  It was orininally listed at $185k, appraised at $215k and my offer was $220k. From what I understand this is the 3rd time it gets appraised and the other two times they left it at $215k
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December 20 2010 - Staten Island
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Answers (14)

Profile picture for jadedea
yes i do think you aare making a mistake by offering higher than what is asked for. just remember everything is negotiable.

oh i forgot to add. since your offer is higher than the asking price, the sellers should pay all closing costs. if they complain, remind them that your offer is way above asking price.
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December 22 2010
Profile picture for k252740
Yes, I do.  They will pay for part of the closing costs.
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December 21 2010
Ok, you will need $12,700 for the down payment plus the closing costs the seller is not paying. Do you have that much?
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December 21 2010
Profile picture for k252740
I have 3.5% for down payment and its a FHA loan.  The house is valued here at Zillow at $278k
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December 21 2010
What you may want to do is renegotiate down to the appraised price. The bank realizes that you submitted an offer that won't appraise.
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December 21 2010
IMHO, I would never offer $30K over an asking price. Who is the seller, HUD? How much money do you have for a down payment?
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December 21 2010
Profile picture for k252740
Oh no, now Im worried that I might of made an offer that was too high??  The house was listed at $185k and I offered $220k.  The house, I must say is in excellent condition. The comparables that I saw back when I originally made the offer, around that area where alot higher than what I offered.  I really like the house and I wanted to have a chance at it.  However, even then, there were 2 previous offers from investors that fell through, so they finally accepted mine. 
Am I making a HUGE mistake by offering alot more than what it was listed for?
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December 21 2010
I'm with Socal, what prompted you to offer $30k more than the sales price? If you buy for $5K more than the appraised value you then need $5,000 plus your down payment. Are you using an FHA or Conventional loan? How much money do you have for a down payment? I dont get the agent's comment that you made a very good offer, he must be representing the seller.
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December 21 2010
You have made an offer and it might have been accepted by the seller but that is meaningless until the bank signs off on the offer. Since it was listed at $185k and you offered $220k you made a very good offer, most people would offer $160k and wonder why they never hear back from the bank. I have done many BPO inspections and it is not unusual to get several BPO appraisals before the bank finally signs the offer to purchase. Unless your area is different than the norm I doubt that there will be comps to support an increase in the appraisal. Even if the appraisal comes in at $225k the bank is still very apt to take your offer unless they have a dozen on the table along with your to choose from. They could come back and ask all people offering to make "Your Highest & Best" offer. Banks can do anything they want in a short sale. Hang in - you in a good position. 
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December 21 2010
Profile picture for SoCal_Engr
"It was orininally listed at $185k, appraised at $215k and my offer was $220k."

Am I missing something here? The OP's current offer is $5K above the appraised value. Is the OP bringing extra cash into the deal to finance, or all cash and the appraised value doesn't matter? At a minimum, why, especially in this market, would someone pay above appraised value for a house?

Shouldn't the OP be hoping it at least appraises for the $220K offer price?
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December 21 2010
You made an offer and it was accepted? By the bank? In a short sale the owners accept the offer and then the bank/lender accepts the offer based on the net proceeds. I'm not sure where you stand.
A short sale is based on the bank/lender accepting less than what is owed on the property. The apprasial should come in higher and should not affect the deal. If it does affect the transaction you did not have an accepted offer in the first place. What does your agent/broker say?
I've personally bought short sales saving hundreds of thousands and always being that and more below the apprasial. On a distressed deal never ever offer the asking price!!! 
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December 21 2010
Hi there
There are several factors that go into play on what price the bank will accept on a short sale.  What's most important is the pay off amount and how much of a loss the investors are willing to take.  The appraisal will simply give them an idea of how under valued the property is and will help them determine how much of a loss the investors are willing or can take. I've seen some banks/investor sell the property at 80-90% of the pay off amount.  You may not know what the pay off amount is but the appraisal will the the ultimate determining factor of what percentage of the pay off they will accept.  All banks are different but they usually are willing to do some amount of negotiating.  I hope this helps!
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December 21 2010
It's not good if the appraisal comes in higher, the bank may not accept your offer then. Good luck, I hope it comes in lower.
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December 20 2010
Hello - the appraisal would be based on the closest comps available.  In our area, they try to find comps within the past 90 days.  I would be extremely surprised if the comps are higher now in your area than they were when the other appraisals were done.  Prices tend to drop during this time of year.

Do you have a buyer's agent?  The buyer's agent would be able to do an analysis for you of the direction of the market.

Depending on the relationships involved, maybe the agent could meet with the appraiser and justify the contract price in a narrative analysis of the market.  Most appraisers are not intimately familiar with the neighborhoods and in the end, appreciate extra information from someone that may be more intimate with the area.  They usually don't want to discuss or be told what to think, but a nicely worded packet can be a useful tool.

Even if the appraisal comes in higher, the bank may have some room to negotiate.  You need a strong agent that can make a strong argument to the negotiator - better to get it off their books than go through the process of finding another buyer and doing another approval.

And finally - be careful about the term appraisal.  Are they doing an appraisal or BPO?  BPO is a broker's price opinion and is done by an agent.  I was able to meet the agent doing the BPO at a property once and explain the situation - he wasn't too familiar with the area.

Best of Luck,
Sonal
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December 20 2010
 
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