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Low Appraisal?

B1GDeal

HR Heisman
Jan 21, 2005
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Question for our resident real estate experts. If a house is sold and a purchase agreement is accepted by both parties at say $600,000. Then, an appraiser comes through and says they are having a hard time finding comps because it's a smaller town and the houses similar that were sold were in 2020 or they are new construction so they can't use them. In the area, there are a few homes that are probably 200k more valuable and some that are nearly that much less. The appraiser used one of the houses worth far less, but none of the higher, because they are "different" which I'm told, is because they have a pool or location that is that much different. Also used a house that is on a lesser lot in the same neighborhood that cost less without a view and suggests it's the same value. Speaking to builders the same or similar house being built now would be at least 100-150k higher than the agreed purchase price, so there is a disconnect. Can a second appraiser be brought in? Any other options? Sounds like if one of the higher-valued homes had sold the appraiser would have bumped the value of the home to the agreed price, but since that hasn't happened the precedent hasn't been set yet or something. The agreed purchase price and appraisal are more than $50k different.
 
Question for our resident real estate experts. If a house is sold and a purchase agreement is accepted by both parties at say $600,000. Then, an appraiser comes through and says they are having a hard time finding comps because it's a smaller town and the houses similar that were sold were in 2020 or they are new construction so they can't use them. In the area, there are a few homes that are probably 200k more valuable and some that are nearly that much less. The appraiser used one of the houses worth far less, but none of the higher, because they are "different" which I'm told, is because they have a pool or location that is that much different. Also used a house that is on a lesser lot in the same neighborhood that cost less without a view and suggests it's the same value. Speaking to builders the same or similar house being built now would be at least 100-150k higher than the agreed purchase price, so there is a disconnect. Can a second appraiser be brought in? Any other options? Sounds like if one of the higher-valued homes had sold the appraiser would have bumped the value of the home to the agreed price, but since that hasn't happened the precedent hasn't been set yet or something. The agreed purchase price and appraisal are more than $50k different.
You could potentially get your own appraisal, you would pay have to pay for it. That would give you a talking point if they are different.
 
Question for our resident real estate experts. If a house is sold and a purchase agreement is accepted by both parties at say $600,000. Then, an appraiser comes through and says they are having a hard time finding comps because it's a smaller town and the houses similar that were sold were in 2020 or they are new construction so they can't use them. In the area, there are a few homes that are probably 200k more valuable and some that are nearly that much less. The appraiser used one of the houses worth far less, but none of the higher, because they are "different" which I'm told, is because they have a pool or location that is that much different. Also used a house that is on a lesser lot in the same neighborhood that cost less without a view and suggests it's the same value. Speaking to builders the same or similar house being built now would be at least 100-150k higher than the agreed purchase price, so there is a disconnect. Can a second appraiser be brought in? Any other options? Sounds like if one of the higher-valued homes had sold the appraiser would have bumped the value of the home to the agreed price, but since that hasn't happened the precedent hasn't been set yet or something. The agreed purchase price and appraisal are more than $50k different.

Yes you can get another appraisal, as @chibearhawk said it is likely you will have to pay for that though. I did once have a bank agree to pay for another appraisal because even they knew the 1st appraisal was so bad and so far off that they coughed up the money to get another more accurate one.

Is there a reason you need another appraisal though? Is the bad appraisal then not giving you enough funds to afford the house? It typically just means you have to bring a large downstroke to closing, is that the issue?
 
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difficulty in getting comparables especially in that situation\smaller town and larger home is not fun. You could have an independent appraiser, but they need to be part of your lenders appraiser approved list. Even then I don’t know if the lender will accept it as they did not order it. The appraisal needs to be signed to the lender. You could always see if the lender would still write the mortgage at The appraised value and you pay the seller the difference
 
Seller... not buyer. I also noticed they valued the lot low in the appraisal as there is a similar lot near that's twice what they have listed for lot value.
 
I would reccomend having your realtor contest the appraisal with comps from the MLS along with any that they can find that have been recorded already. I would also use if any current pending sales (currently under contract) that are similar to yours and have the appraiser review those as well. I'm a real estate broker in the Miami/Ft. Lauderdale area and have been using this method for 25+ yrs. It's very effective.
 
As a seller I have had buyer appraisals come in low two different times. In both cases, the markets were fairly hot so our view was not to reduce the price due to a third party appraisal.

In both cases, the real estate agents chipped in money from their commissions to close the gap.

Also in both cases, we pushed hard to get higher priced comps, which then did happen. The new comps helped close the gap.

Your $50k gap is big considering a $600k sale and only 6% commissions. I would really push for better comps, that is almost a 10% difference.

The buyer could also chip in extra outside the deal.
 
My guess this is only a problem as it relates to the buyer trying to get funding for the loan. The house sounds way over priced for the market it is in (the example you used) congrats on getting what sounds like a really great price for the house.
 
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I am waiting to hear what buyers might do. But, in the PA they have an out if it didn't appraise at the purchase price. I have also found some errors or missing items in the appraisal that I am asking that they consider or revisit to include the value of the lot when I can show one very similar available for much higher than on the report.
 
The buyer could also chip in extra outside the deal.
this would be my first suggestion too. But given you are here im guessing thats not an option*, so hopefully you can get the comps adjusted

(*I want to add a comment about the buyer maybe biting off more than they can chew on the house if they can't come up with more cash for the house they want, but i probably shouldn't).

Good Luck either way, real estate transactions can be stressful!
 
Yes you can get another appraisal, as @chibearhawk said it is likely you will have to pay for that though. I did once have a bank agree to pay for another appraisal because even they knew the 1st appraisal was so bad and so far off that they coughed up the money to get another more accurate one.

Is there a reason you need another appraisal though? Is the bad appraisal then not giving you enough funds to afford the house? It typically just means you have to bring a large downstroke to closing, is that the issue?
my thoughts also. I thought the appraisal only limited what the bank will loan. I am assuming anyone buying a $600k home would be bringing some cash to the deal and financing a lower amount.

Good Luck!
 
Sorry, no advice, but It’s 2022, this should be an algorithm. Look at the zestimate and move on. We bought a house in 2021 and I couldn’t believe the stacks of paper at closing, when it should all be electronic. Anywho… :)
 
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Very few comps for approx land WITH home I’m assuming. Hopefully your realtor talked about that as even though there is new construction they - can’t use it for appraisal purpose. Good luck - tough situation.
Yes, very few comps of a lot with home... they are either far less expensive, far more expensive, sold more than 24 months ago, or new construction.
 
Seems like the appraiser could come up with an average price per square foot based on comps, factor in whatever local real estate value increases have shown, and go from there.

How frustrating for you.
 
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A competent Realtor should be able to help.
I say competent because there are agents out there who are little more than glorified order writers in a red hot market.
 
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I would reccomend having your realtor contest the appraisal with comps from the MLS along with any that they can find that have been recorded already. I would also use if any current pending sales (currently under contract) that are similar to yours and have the appraiser review those as well. I'm a real estate broker in the Miami/Ft. Lauderdale area and have been using this method for 25+ yrs. It's very effective.
I’m told pending sales or anything sold more than 12 months ago won’t be considered.
 
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You can contest it. We faced a similar situation when we refinanced a few years ago. Our neighbors a few doors down have a similar home and they just went through it and told us what their appraisal came in at. Ours came in 15% lower. We had multiple sales in our neighborhood with homes of the same age and size +/- a bit, but the only home he used in was one a bit older and several in other non-master communities. He also made a $0 adjustment for our basement being finished because “finished basement space adds no value”. WTF?!?!? We contested and they ran the comps and agreed with us. New appraisal came in 17% higher. Still under our neighbors which was BS.
 
A competent Realtor should be able to help.
I say competent because there are agents out there who are little more than glorified order writers in a red hot market.
I imagine the commission on the sale is anywhere between 25 and 35,000. Go to the broker find out if they want to play ball on cutting the commission. The buyer could as well on their side but that’s up to them
 
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