House not appraising for amount we were offered!

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Topic Author
Yellowhouse
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House not appraising for amount we were offered!

Post by Yellowhouse » Mon Jul 15, 2019 8:55 am

We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

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willthrill81
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Re: House not appraising for amount we were offered!

Post by willthrill81 » Mon Jul 15, 2019 8:57 am

It's possible that a second appraisal will be ordered. But if it isn't and/or if the the $230k appraised value stands, then there are only two options I'm aware of. Either the buyers will need to pay the difference between the offered price and the appraised value in cash or you'll need to lower the price of the home.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

wilked
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Re: House not appraising for amount we were offered!

Post by wilked » Mon Jul 15, 2019 8:58 am

buyer's market or seller's market where you are?

which city?

Did you have an open house? How was the traffic? Does your realtor think you have more offers coming? What does he/she think?

Lots of questions, but not enough info to offer any advice

rascott
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Re: House not appraising for amount we were offered!

Post by rascott » Mon Jul 15, 2019 8:59 am

Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

Your realtor will have no luck fighting with the appraiser. They might not even reply.

I wouldn't come down a dime. It's the buyers problem. If they can't close put it back on market.

Jags4186
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Re: House not appraising for amount we were offered!

Post by Jags4186 » Mon Jul 15, 2019 9:00 am

Does your contract have an appraisal/financing contingency? If there is a financing contingency the buyers can walk. If there isn’t you can compel them to buy the house.

Either way, I wouldn’t bother worrying about it until the sellers make a big deal about it.
Last edited by Jags4186 on Mon Jul 15, 2019 9:01 am, edited 1 time in total.

rascott
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Re: House not appraising for amount we were offered!

Post by rascott » Mon Jul 15, 2019 9:00 am

wilked wrote:
Mon Jul 15, 2019 8:58 am
buyer's market or seller's market where you are?

which city?

Did you have an open house? How was the traffic? Does your realtor think you have more offers coming? What does he/she think?

Lots of questions, but not enough info to offer any advice

They got an over asking price offer first night it was on market. Guessing a sellers market

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willthrill81
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Re: House not appraising for amount we were offered!

Post by willthrill81 » Mon Jul 15, 2019 9:03 am

rascott wrote:
Mon Jul 15, 2019 8:59 am
Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

Your realtor will have no luck fighting with the appraiser. They might not even reply.

I wouldn't come down a dime. It's the buyers problem. If they can't close put it back on market.
It may be the OP's problem as well. Most buyers need a mortgage, and a low appraisal on another offer may put the OP in this precise situation again. However, it might be that the current buyer or another will be willing to come up with the difference in cash or else buy the entire property with cash. So I too would recommend putting it back on the market if the current buyer isn't willing and able to do that.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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willthrill81
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Re: House not appraising for amount we were offered!

Post by willthrill81 » Mon Jul 15, 2019 9:05 am

rascott wrote:
Mon Jul 15, 2019 9:00 am
wilked wrote:
Mon Jul 15, 2019 8:58 am
buyer's market or seller's market where you are?

which city?

Did you have an open house? How was the traffic? Does your realtor think you have more offers coming? What does he/she think?

Lots of questions, but not enough info to offer any advice

They got an over asking price offer first night it was on market. Guessing a sellers market
Yes, that's a strong signal of a seller's market. It's not uncommon for appraisers to 'get behind' the rapidly improving value of properties in one. In some areas, appraisers actually get a copy of the purchase agreement and are allowed to use it as a factor in determining the value of the property.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

bberris
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Re: House not appraising for amount we were offered!

Post by bberris » Mon Jul 15, 2019 9:09 am

rascott wrote:
Mon Jul 15, 2019 8:59 am
Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

Your realtor will have no luck fighting with the appraiser. They might not even reply.

I wouldn't come down a dime. It's the buyers problem. If they can't close put it back on market.
All buyers who need a mortgage will have the same issue unless they have a large down payment. And they will potentially have to pay PMI that they weren't expecting.

ohai
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Re: House not appraising for amount we were offered!

Post by ohai » Mon Jul 15, 2019 9:10 am

I doubt this buyer would have given you an offer above ask on the same day as your listing if they had not already been researching houses in the area and were confident in their ability to pay for it. It sounds that they are motivated at the current level and will likely be able to pay a bit more in cash.

miamivice
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Re: House not appraising for amount we were offered!

Post by miamivice » Mon Jul 15, 2019 9:11 am

rascott wrote:
Mon Jul 15, 2019 8:59 am
Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

Your realtor will have no luck fighting with the appraiser. They might not even reply.

I wouldn't come down a dime. It's the buyers problem. If they can't close put it back on market.
The downside with this strategy is that the next buyer will run into the same appraisal issue.

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FlyAF
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Re: House not appraising for amount we were offered!

Post by FlyAF » Mon Jul 15, 2019 9:13 am

It could become the OP problem as I'm not sure how many buyers at that price point just have an extra 27k laying around to come out of pocket to close the deal. Also, buyers tend to look at an appraisal as what the house is worth. Time will tell.

miamivice
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Re: House not appraising for amount we were offered!

Post by miamivice » Mon Jul 15, 2019 9:17 am

Whatever you do, do not get into an argument with the appraiser. Doing so could cause things to end badly for both you and your agent.

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Re: House not appraising for amount we were offered!

Post by Jack FFR1846 » Mon Jul 15, 2019 9:19 am

We had this issue when buying our first house in 1985 in a skyrocketing Boston market. Offer accepted at $125k, bank appraisal came in at $114.5k. We came up with more money to have 20% down and went on our merry way to closing.
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dm200
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Re: House not appraising for amount we were offered!

Post by dm200 » Mon Jul 15, 2019 9:21 am

I might first look at the details of the appraisal to make sure all objective details of the house are correct: square footage, number of bedrooms, number of bathrooms, and so on.

rascott
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Re: House not appraising for amount we were offered!

Post by rascott » Mon Jul 15, 2019 9:29 am

bberris wrote:
Mon Jul 15, 2019 9:09 am
rascott wrote:
Mon Jul 15, 2019 8:59 am
Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

Your realtor will have no luck fighting with the appraiser. They might not even reply.

I wouldn't come down a dime. It's the buyers problem. If they can't close put it back on market.
All buyers who need a mortgage will have the same issue unless they have a large down payment. And they will potentially have to pay PMI that they weren't expecting.

It's a sellers market.....seller has all the power. No reason to sell below current market price because certain buyers can't come up with enough cash. If the market is that strong, another buyer will.

Also another buyer is going to have a different appraiser, so it's a total guess if it would even be an issue.

I've sold houses over appraised value a couple times. Last one came in 20k low.. told buyer they could pay our agreed price or we could cancel contract. They came up with the extra funds.

Zero reason for a seller that's had a house for sale for a half a day to take thousands less to appease a cash strapped buyer. And at this point, buyer hasn't even asked for a reduction, so could be moot point.

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Yellowhouse
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Re: House not appraising for amount we were offered!

Post by Yellowhouse » Mon Jul 15, 2019 9:37 am

The house resides in a red hot Louisville/Southern Indiana area. The new East End bridge that opened just two years ago drove the current market into its frenzy. Our house is in very close proximity to the many amenities in the area.

I think the buyer is in the process of selling his house. Based on that information, I feel like he's not in the best position to negotiate a deal. He needs to cough up the difference.

barnaclebob
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Re: House not appraising for amount we were offered!

Post by barnaclebob » Mon Jul 15, 2019 9:38 am

If you put it back on the market because the buyers wont cover the gap then you'll want to make sure your next buyer can cover that gap. This means all cash offers or a contingency that specifically states the buyer will cover up to XX,000 of an appraisal shortfall.

A lot of people feel like they are overpaying if an appraisal comes up short and they are being asked to cover it which. That isn't really true.

FWIW my realtor was able to get the appraisal on the house we sold raised by 30k up to the offer price. He wrote the appraiser a big list of things that made the house worth what was offered and what set it apart from the comps. 3 offers of at least 15k over asking within a few days of going on the market (it appraised for our asking price), green space on 3 sides of the house so only one neighbor, upgraded kitchen, new roof, huge deck etc.
Last edited by barnaclebob on Mon Jul 15, 2019 9:42 am, edited 1 time in total.

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dm200
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Re: House not appraising for amount we were offered!

Post by dm200 » Mon Jul 15, 2019 9:42 am

Yes - in a real sellers market - there very well may be plenty of buyers that are willing and able to pay the difference between the appraised value and the offered price.

Seems like an experienced agent should be aware of such a factor in the market.

In the last several years, I often hear of folks in our neighborhood selling above the asking price immediately after the home is listed. In one case, a buyer just heard that someone was selling and made an excellent (and surprisingly high to the seller) offer before the house was listed!

I think that this market is continuing because Amazon HQ2 is coming here.

stan1
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Re: House not appraising for amount we were offered!

Post by stan1 » Mon Jul 15, 2019 9:43 am

There is a cost to the seller to put it back on the market. Another 30 to 60 days of mortgage, property tax, and upkeep. Another buyer with another inspection. Inconvenience of more showings and open houses. Anyone with a mortgage is going to require an appraisal contingency. The house isn't going to appraise higher with another buyer. So now you are saying you are going to hold out for a cash buyer?

It's easy for someone on the internet to advice you to refuse to negotiate but you have to decide for yourself what to do. Putting it back on the market has risks, too.

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F150HD
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Re: House not appraising for amount we were offered!

Post by F150HD » Mon Jul 15, 2019 9:55 am

To me, thats pretty significant -not talking $1000-$5000 difference between appraisal and your listing price.

Are you sure your listing price isn't too high? (begs question of Realtor)

Feel like info is missing. $20k difference on a home in that price range is significant, even in a sellers market.

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dm200
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Re: House not appraising for amount we were offered!

Post by dm200 » Mon Jul 15, 2019 9:59 am

F150HD wrote:
Mon Jul 15, 2019 9:55 am
To me, thats pretty significant -not talking $1000-$5000 difference between appraisal and your listing price.
Are you sure your listing price isn't too high? (begs question of Realtor)
Feel like info is missing. $20k difference on a home in that price range is significant, even in a sellers market.
In some markets, $20k is common.

Yes - certainly evaluate the asking price. Seems ok, since offer was more - but who knows?

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Re: House not appraising for amount we were offered!

Post by Vanguard Fan 1367 » Mon Jul 15, 2019 10:06 am

I ran into this issue recently. I had a property I own appraised at 600k. I felt that it was low. Thankfully we worked out something else besides a sale at 600K. I ran into this issue with my son trying to buy a house in a hot market. He was asked to pay some extra fees because the appraisal was less than the selling price. Believe me that we were lucky to get it for that price and not higher. I believe that since the real estate problems leading to the Great Recession that appraisers are pretty conservative.

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Re: House not appraising for amount we were offered!

Post by Sandtrap » Mon Jul 15, 2019 10:17 am

Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??
Consider that having a "live buyer" for 25k less than your asking, but equal to the appraised value, might be better than putting it back on the market and not finding a buyer at even that amount.

It depends on your exact location and market and comps. On that basis, you might consider taking the live offer you have in hand, hopefully, or taking a chance for more.

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Bir48die
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Re: House not appraising for amount we were offered!

Post by Bir48die » Mon Jul 15, 2019 10:29 am

I live in a very hot market. When we put our house up for sale after buying another we had several offers. One was very clean while another was $25k higher or about 7% of asking price. Though I had done a ton of work on the house we knew it probably wouldn't appraise to the higher offer. Many buyers in the market were offering significantly over appraisal in hopes that sellers will drop the price down to the lower level.

We just took the lower cleaner deal which in it's own right was a very fair offer.

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8foot7
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Re: House not appraising for amount we were offered!

Post by 8foot7 » Mon Jul 15, 2019 10:34 am

I would not worry too much about this until you get a second buyer with a second appraisal that comes in too low, at which point you need to ask your listing agent if you are overvalued. After a couple of low appraisals, it doesn't matter if you think you are worth 255k if your buyers can't get a loan on a 255k purchase price; you'll find that you are indeed not worth 255k since you have no buyers at that level.

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8foot7
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Re: House not appraising for amount we were offered!

Post by 8foot7 » Mon Jul 15, 2019 10:36 am

dm200 wrote:
Mon Jul 15, 2019 9:59 am
F150HD wrote:
Mon Jul 15, 2019 9:55 am
To me, thats pretty significant -not talking $1000-$5000 difference between appraisal and your listing price.
Are you sure your listing price isn't too high? (begs question of Realtor)
Feel like info is missing. $20k difference on a home in that price range is significant, even in a sellers market.
In some markets, $20k is common.

Yes - certainly evaluate the asking price. Seems ok, since offer was more - but who knows?
It's more about the percentage - this appraisal is off by 10% of price whereas 20k on a 600k house is 3%, or essentially noise.

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8foot7
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Re: House not appraising for amount we were offered!

Post by 8foot7 » Mon Jul 15, 2019 10:37 am

miamivice wrote:
Mon Jul 15, 2019 9:17 am
Whatever you do, do not get into an argument with the appraiser. Doing so could cause things to end badly for both you and your agent.
The appraiser is unlikely to return your phone call or your agent's call, so this is pretty much irrelevant. They work for the bank and they know who butters their bread.

HomeStretch
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Re: House not appraising for amount we were offered!

Post by HomeStretch » Mon Jul 15, 2019 10:42 am

Wait to see what the buyer says.

Did the appraiser see your house in person or use the city property records to do an appraisal sight unseen? Make sure the appraisal/property record info used are accurate.

miamivice
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Re: House not appraising for amount we were offered!

Post by miamivice » Mon Jul 15, 2019 10:57 am

8foot7 wrote:
Mon Jul 15, 2019 10:37 am
miamivice wrote:
Mon Jul 15, 2019 9:17 am
Whatever you do, do not get into an argument with the appraiser. Doing so could cause things to end badly for both you and your agent.
The appraiser is unlikely to return your phone call or your agent's call, so this is pretty much irrelevant. They work for the bank and they know who butters their bread.
I'm writing from experience. When we bought our current house, the appraisal came in lower than the sellers wanted. The sellers and sellers agent each wrote letters to the appraiser telling him why his apprasial was wrong. Rather than ignoring them, the offended appraiser called the "undue pressure" clause and told the mortgage company that his apprasial was now invalid due to the excess pressure the sellers were placing on him. He also threatened to report the listing agent to the state board for interfereing with his apprasial.

We got it all worked out in the end, but we almost lost our steller 3.25% rate with minimal closing fees due to the argument between the sellers and the appraiser.

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Re: House not appraising for amount we were offered!

Post by John Doe 123 » Mon Jul 15, 2019 11:08 am

We had the same problem when we sold our home in April.

Any competent buyers agent is going to reply back offering the appraised value and put the ball back in the seller's court.

We ended up negotiating, and the buyer was willing in to cough up some cash out of pocket. In the end we met roughly in the middle of the appraised value and the offer.

If the buyer was not willing to cough up any money out of pocket, we were prepared to take it back to market.

You need to decide if you are willing to accept an amount lower than the original offer. If you are not prepared to accept a lower amount, then dig your heels in and be prepared to take it back to market if the buyer declines. This is easy for me to say from an objective standpoint from the outside looking in. When I was directly involved in the process a few months ago it was very emotional and real.

Take time to fully consider your options and try to remove emotion from the situation and make the best decision for you and your family. Look at the comps in your area. Is the 257k a realistic price? It is possible, though not a guarantee, that the next buyer will also run into a low appraisal.

You mentioned you would accept $250k. If that is true, then my suggestion would be to submit a $250k offer back to them and make clear this is your take it or leave it price. If they reject it, then be prepared to go back to market.

Best of luck to you. Remember to take a deep breath and don't get too overwhelmed. You have lots of options here. Make a prudent and analytical choice.
Last edited by John Doe 123 on Mon Jul 15, 2019 11:15 am, edited 1 time in total.

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Re: House not appraising for amount we were offered!

Post by adamthesmythe » Mon Jul 15, 2019 11:14 am

> most banks only loan up to the appraisal amount.

No. Banks loan up to the appraisal amount less X%.

If the buyer brings enough downpayment he can still get a loan. Which brings us to the exact wording of his financing contingency...

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Re: House not appraising for amount we were offered!

Post by KyleAAA » Mon Jul 15, 2019 11:17 am

rascott wrote:
Mon Jul 15, 2019 8:59 am
Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

Your realtor will have no luck fighting with the appraiser. They might not even reply.

I wouldn't come down a dime. It's the buyers problem. If they can't close put it back on market.
Well, it’s the sellers problem too. If it didn’t appraise this time, there are good odds it won’t appraise next time either. You might not be able to sell other than to a cash buyer.

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Re: House not appraising for amount we were offered!

Post by FlyAF » Mon Jul 15, 2019 11:42 am

KyleAAA wrote:
Mon Jul 15, 2019 11:17 am
rascott wrote:
Mon Jul 15, 2019 8:59 am
Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

Your realtor will have no luck fighting with the appraiser. They might not even reply.

I wouldn't come down a dime. It's the buyers problem. If they can't close put it back on market.
Well, it’s the sellers problem too. If it didn’t appraise this time, there are good odds it won’t appraise next time either. You might not be able to sell other than to a cash buyer.
Like has been stated many times, a cash buyer is not needed. The buyer simply needs to come up with a larger down payment to close the gap. In this case, the gap is significant though.

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Re: House not appraising for amount we were offered!

Post by cherijoh » Mon Jul 15, 2019 11:58 am

ohai wrote:
Mon Jul 15, 2019 9:10 am
I doubt this buyer would have given you an offer above ask on the same day as your listing if they had not already been researching houses in the area and were confident in their ability to pay for it. It sounds that they are motivated at the current level and will likely be able to pay a bit more in cash.
IMO it is not just a "bit more" in cash. Say the potential buyers were planning to put 20% down to avoid PMI. If the house had appraised at or above the offer that would have been a $51.4K downpayment. With an appraisal of $230K, they would have to come up the $73K ($46K for 20% of $230K mortgage + $27 to come up to the offer price) to still get a mortgage with 20% down. That is a 42% bigger down payment than they may have been planning on.

rascott
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Re: House not appraising for amount we were offered!

Post by rascott » Mon Jul 15, 2019 12:11 pm

KyleAAA wrote:
Mon Jul 15, 2019 11:17 am
rascott wrote:
Mon Jul 15, 2019 8:59 am
Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

Your realtor will have no luck fighting with the appraiser. They might not even reply.

I wouldn't come down a dime. It's the buyers problem. If they can't close put it back on market.
Well, it’s the sellers problem too. If it didn’t appraise this time, there are good odds it won’t appraise next time either. You might not be able to sell other than to a cash buyer.

No, not even close to accurate. Buyer can still get a mortgage...just not for as quite as much. Will require a larger down payment.

No it's not the seller's problem, unless there are no other buyers out there. His house was for sale for less than 12 hours.

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Re: House not appraising for amount we were offered!

Post by KyleAAA » Mon Jul 15, 2019 12:37 pm

rascott wrote:
Mon Jul 15, 2019 12:11 pm
KyleAAA wrote:
Mon Jul 15, 2019 11:17 am
rascott wrote:
Mon Jul 15, 2019 8:59 am
Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

Your realtor will have no luck fighting with the appraiser. They might not even reply.

I wouldn't come down a dime. It's the buyers problem. If they can't close put it back on market.
Well, it’s the sellers problem too. If it didn’t appraise this time, there are good odds it won’t appraise next time either. You might not be able to sell other than to a cash buyer.

No, not even close to accurate. Buyer can still get a mortgage...just not for as quite as much. Will require a larger down payment.

No it's not the seller's problem, unless there are no other buyers out there. His house was for sale for less than 12 hours.
Most buyers in that range are not flush with cash and will not be able to make up the difference. They may also anchor on the appraisal and refuse to pay that much. Anything that reduces the potential pool of buyers is most definitely the seller’s problem. I never said buyer couldn’t get a mortgage so I’m not sure which part you think is inaccurate.

rascott
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Re: House not appraising for amount we were offered!

Post by rascott » Mon Jul 15, 2019 12:46 pm

KyleAAA wrote:
Mon Jul 15, 2019 12:37 pm
rascott wrote:
Mon Jul 15, 2019 12:11 pm
KyleAAA wrote:
Mon Jul 15, 2019 11:17 am
rascott wrote:
Mon Jul 15, 2019 8:59 am
Yellowhouse wrote:
Mon Jul 15, 2019 8:55 am
We put our house on the market on a Friday morning and by 8pm that night, we had an offer for 257k. Our asking price was 254.9k, so the offer was obviously a huge offer.

Fast forward to last week and the appraisal came back 230k. We now have a dilemma because most banks only loan up to the appraisal amount. The buyer hasn't countered as of today because my realtor is fighting with the appraisal people.

What exactly should I do?? I'm willing to come down to 250k, thoughts??

Your realtor will have no luck fighting with the appraiser. They might not even reply.

I wouldn't come down a dime. It's the buyers problem. If they can't close put it back on market.
Well, it’s the sellers problem too. If it didn’t appraise this time, there are good odds it won’t appraise next time either. You might not be able to sell other than to a cash buyer.

No, not even close to accurate. Buyer can still get a mortgage...just not for as quite as much. Will require a larger down payment.

No it's not the seller's problem, unless there are no other buyers out there. His house was for sale for less than 12 hours.
Most buyers in that range are not flush with cash and will not be able to make up the difference. They may also anchor on the appraisal and refuse to pay that much. Anything that reduces the potential pool of buyers is most definitely the seller’s problem. I never said buyer couldn’t get a mortgage so I’m not sure which part you think is inaccurate.

You stated they might not be able to sell to other than a cash buyer. No just need someone that can come up with an extra $25k cash or so. That's a long way from a $250k cash buyer.

We aren't talking about an issue where seller has limited pool of buyers. Clearly a hot market. Any advice at this point that involves seller dropping his price at all, is misguided. I wouldn't have even accepted this (or any) offer until home had been on market for a a few days.

Sellers in his situation are wise to state that all offers will be reviewed after 5-7 days, or something around there.

jabroni
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Re: House not appraising for amount we were offered!

Post by jabroni » Mon Jul 15, 2019 12:50 pm

We had a similar issue when selling our last house. We listed it on Easter Sunday and had several offers that day, which is a testament to how much of a sellers market it was. The list price was $225k, and the offer was for $230k. The appraisal came in at $220k.

When we got the appraisal report, we found several inaccuracies with it. When pointed out to the appraiser, he basically said that he wouldn't do anything about it, which would have required us to go through a bureaucratic mess to get it fixed. Or we could have gotten a second appraisal. We were on a timeline to get financing settled for the next house, so we made a deal with the buyer to drop the price to $228k and make them come up with the additional cash. If that buyer didn't want it, there were plenty of others who would.

Appraisers are awful. From my limited experience and stories from others, they appear to refuse to admit when they've made a mistake. Whenever we sell our next house, I'll make sure that we aren't in a hurry, just in case a similar thing occurs. I would much rather dedicate time to fighting the appraiser to prove a point than to make the buyer jump through hoops.

bmelikia
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Re: House not appraising for amount we were offered!

Post by bmelikia » Mon Jul 15, 2019 2:13 pm

Maybe you can seller finance the amount the buyers are short and lien their vehicles as collateral?
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

J295
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Re: House not appraising for amount we were offered!

Post by J295 » Mon Jul 15, 2019 2:19 pm

1. Negotiate solution with this buyer
Or
2. Put house back on market


Outcome depends on the pertinent facts. Like most decisions this doesn’t easily fall into one size fits all.

straws46
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Re: House not appraising for amount we were offered!

Post by straws46 » Mon Jul 15, 2019 2:29 pm

Appraisals are based on the reported sale prices of comparable properties. In a rising market an MAI appraisal will always be low since prices have been rising since the dates of the older sales used as comps. Same thing in reverse in a falling market. since most buyers will include a financing contingency sellers in a rising market need to be patient to get top dollar. Good luck.

WillRetire
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Re: House not appraising for amount we were offered!

Post by WillRetire » Mon Jul 15, 2019 2:39 pm

straws46 wrote:
Mon Jul 15, 2019 2:29 pm
Appraisals are based on the reported sale prices of comparable properties. In a rising market an MAI appraisal will always be low since prices have been rising since the dates of the older sales used as comps. Same thing in reverse in a falling market. since most buyers will include a financing contingency sellers in a rising market need to be patient to get top dollar. Good luck.
Yes, exactly. The OP should do nothing. Let the buyer figure out what he/she wants to do. If coming up with the extra money is too big a stretch for the buyer, the deal could fall through.

Do NOT seller-finance the difference. The buyer & his/her realtor will (should) figure out that the same thing could happen if they pursue another property.

OP: Give the buyer time to figure this out. But not forever.

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willthrill81
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Re: House not appraising for amount we were offered!

Post by willthrill81 » Mon Jul 15, 2019 3:45 pm

John Doe 123 wrote:
Mon Jul 15, 2019 11:08 am
Any competent buyers agent is going to reply back offering the appraised value and put the ball back in the seller's court.
In a 'normal' market, yes. But in a strong seller's market, they'd better not unless they want the buyers to lose any chance of acquiring the home. Our current area is the second in which we've owned a home where it became standard practice for buyers to have to cover the difference between the purchase price and the amount their bank would loan them on the property. Market prices have (and in our current area, are) simply moving up faster than appraisers 'can catch up'.

To those saying that that's unlikely to happen in this price range, we have good friends who lived across the street and got multiple offers on their home in 48 hours and sold to a cash buyer with no contingencies for $260k. So yes, this phenomenon is not exclusive to high priced homes.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

alfaspider
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Re: House not appraising for amount we were offered!

Post by alfaspider » Mon Jul 15, 2019 3:55 pm

F150HD wrote:
Mon Jul 15, 2019 9:55 am
To me, thats pretty significant -not talking $1000-$5000 difference between appraisal and your listing price.

Are you sure your listing price isn't too high? (begs question of Realtor)

Feel like info is missing. $20k difference on a home in that price range is significant, even in a sellers market.
Unlikely [edit by Moderator Misenplace] the listing price was too high if the OP received an above market offer within 12 hours.

The whole appraisal business is a bit silly though. By definition, something is worth what a willing buyer will pay for it. But in this case, a willing buyer has agreed to the contract price, so saying it is not worth that is inherently odd.

michaeljc70
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Re: House not appraising for amount we were offered!

Post by michaeljc70 » Mon Jul 15, 2019 4:01 pm

alfaspider wrote:
Mon Jul 15, 2019 3:55 pm
F150HD wrote:
Mon Jul 15, 2019 9:55 am
To me, thats pretty significant -not talking $1000-$5000 difference between appraisal and your listing price.

Are you sure your listing price isn't too high? (begs question of Realtor)

Feel like info is missing. $20k difference on a home in that price range is significant, even in a sellers market.
Seems silly to say the listing price was too high if the OP received an above market offer within 12 hours.

The whole appraisal business is a bit silly though. By definition, something is worth what a willing buyer will pay for it. But in this case, a willing buyer has agreed to the contract price, so saying it is not worth that is inherently odd.
The bank doesn't care if someone pays $256k if it appraises for $230k if they don't default (which they cannot know in advance). The bank wants to know if they do default that someone else will pay $256k.
Last edited by michaeljc70 on Mon Jul 15, 2019 4:05 pm, edited 1 time in total.

crockpotinvesting
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Re: House not appraising for amount we were offered!

Post by crockpotinvesting » Mon Jul 15, 2019 4:01 pm

There is no better way to value a home than what another party is willing to pay for it. Poor appraisal. You should be fine once you get a second opinion. Hopefully the low appraisal doesn’t scare away the buyers original offer. It’s like an equity analyst, it’s there opinion on the price target but it doesn’t mean they are correct.

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Re: House not appraising for amount we were offered!

Post by Vanguard Fan 1367 » Mon Jul 15, 2019 4:02 pm

alfaspider wrote:
Mon Jul 15, 2019 3:55 pm
F150HD wrote:
Mon Jul 15, 2019 9:55 am
To me, thats pretty significant -not talking $1000-$5000 difference between appraisal and your listing price.

Are you sure your listing price isn't too high? (begs question of Realtor)

Feel like info is missing. $20k difference on a home in that price range is significant, even in a sellers market.
Seems silly to say the listing price was too high if the OP received an above market offer within 12 hours.

The whole appraisal business is a bit silly though. By definition, something is worth what a willing buyer will pay for it. But in this case, a willing buyer has agreed to the contract price, so saying it is not worth that is inherently odd.
Great post! As a seller who has tried to sell a couple of houses in a slow market for more than a year each time I agree that something is a bit odd that the appraisal is so low with an above market offer within 12 hours

alfaspider
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Re: House not appraising for amount we were offered!

Post by alfaspider » Mon Jul 15, 2019 4:27 pm

michaeljc70 wrote:
Mon Jul 15, 2019 4:01 pm
alfaspider wrote:
Mon Jul 15, 2019 3:55 pm
F150HD wrote:
Mon Jul 15, 2019 9:55 am
To me, thats pretty significant -not talking $1000-$5000 difference between appraisal and your listing price.

Are you sure your listing price isn't too high? (begs question of Realtor)

Feel like info is missing. $20k difference on a home in that price range is significant, even in a sellers market.
Seems silly to say the listing price was too high if the OP received an above market offer within 12 hours.

The whole appraisal business is a bit silly though. By definition, something is worth what a willing buyer will pay for it. But in this case, a willing buyer has agreed to the contract price, so saying it is not worth that is inherently odd.
The bank doesn't care if someone pays $256k if it appraises for $230k if they don't default (which they cannot know in advance). The bank wants to know if they do default that someone else will pay $256k.
Of course, but if it's unlikely there is only one person in the entire world that will pay similar amounts if it were truly an unrelated party. Really, I think the main purpose of the appraisal is to prevent fraudulent transactions (i.e. intentionally overpaying for a house as part of some sort of kickback scheme).

Topic Author
Yellowhouse
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Re: House not appraising for amount we were offered!

Post by Yellowhouse » Mon Jul 15, 2019 5:15 pm

Our market is an extremely HOT real estate market...you might even say it's a bubble. What seems to have happened is that the market is ahead of the appraiser's evaluation. The comps simply aren't in yet, meaning I'm at the leading edge of a monster market. In boglehead speak, I've timed the market probably a little too good.

It's frustrating to me because I've got a couple willing to pay 257k, but the appraiser basically puts a cap on the loan when he came in 27k light!!! This doesn't seem like a free market enterprise to me.

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