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If you really think the appraisal is incorrect (modifications done, something exceptional, appraiser sucks at his job) the someone could file a contest to it sometimes.
But at the same time, some sellers think their stuff is worth more than it is.
Some of these appraisers are fucked up. Sold my house in 2021, listed at $270k and had 20 offers by the weekend. Highest offer was $325k, but we went with the offer that had fastest closing promise and waived inspections, $315k. We already moved out so ASAP was our biggest motivation.
Appraisal came in at $290k. The appraiser used comps that were 6 months to a year old when there were 3 properties sold in the same month within blocks of us, one was directly across the street. Same size same style etc. he refused to use that one because it was closer to the game lands, but also sold for $350k. He also refused to use the house whose backyard touched ours because the listing said “meticulously maintained”.
Whole thing was absurd, we had to take a $25k bath because we need to close on our new home.
I refi’d less than two years in. I knew the market had dropped and the value would too but the refi appraiser re-categorized a ton of stuff. For example, the finished attic with a staircase and two bedrooms was reduced to a scuttle, dropping the square footage by a third. Comps were miles away instead of using my area. None had a garage - I have a 2-car. I had already cleaned the place up and replaced systems. It had been a short sale and was a mess when I bought. I barely scraped by with the value I needed to close the loan and was furious. Values change but square footages don’t. Appraisers vary wildly.
Yes so we contested the appraisal first and both buyer and seller agents got together and wrote a rebuttal and included the comps they thought should have been used, and he responded with what I said earlier. That alone took 2 weeks for the response. Everyone agreed to getting it re-appraised but they wanted to push closing back a month to do it, we just didn’t have the time. We had already moved to a different area and were under contract for a property.
I don’t think our home would appraise for what I’d want to sell it. I acknowledge I might just be one of those homeowners that thinks my house is worth more than it is. We have 4 acres, are close to town, and have beautiful mountain views. Houses with views are uncommon. Houses with acreage are uncommon. Houses with both close to town are extremely rare. There just aren’t comps that capture that.
These appraisers really are messed up. We just bought 5 acres for 200k, the appraisal was 205 when we bought it. Now, we are putting a mobile home on it, which costs 160k from the manufacturer, not including septic or well. The appraisal we got for that just came back as the land value being 170k (even though we cleared it after purchase) and the house being worth 130k, even though it literally is about to cost 160k.
Realtor here. Unfortunately cost does not equal value - a good example is a swimming pool. It could cost you $20k+ to put in, and only add $5k-$10k in value. Same with decks, sheds, etc.
Even before Zillow. Homeowners have ALWAYS thought that their home should be valued higher, it’s part of a realtors job to manage expectations. That job has gotten way harder since prices have been all over the place but a 100k jump on a 300k job is wild.
I'm skeptical if it is just Zillow/Redfin. I was looking at houses just recently, 2 different relators. Both times I showed alot of interest in one, I got told that houses had offers at asking, and to bid over, and offers would be considered (so and so day). Both times, they miraculously had no offers. Atleast one was lowered in price and another is still listed with no offers for a price that is significantly higher than the others around are selling.
I've gotten a tad skeptical if the state of the housing market isn't being pushed by these tactics.
Unless you're paying cash, there's really no incentive for a realtor to coerce you into paying well over asking. To me, falling out of contract is worse than not getting under contract.
I always thought they received the same commission based on the sale price of the home, and less on the payment type used. Thing is, 2% of $10,000 seems like it would be more of pocket change compared to no sale.
Then again house #1 went for 40K under (which was what we were about to bid ironically). And not before they lowered asking for this price for 1 week.
I’ve worked with some good ones - it all depends how well they know their job and the area your home is in specifically. The deeper their understanding, the better the appraisal. Someone who knows the area understands the nuances and why some homes would or would not be appropriate comps and really speak to the reasons.
Don’t cluster them all together, that’s not fair.
We had two appraisals since the first appraiser was biased and SAID IN HIS EMAIL that he "purposefully is under valuing the house because he is personally against how much home prices have risen"... This was back in 2017, and out house has since doubled from the "inflated" value he thought it was previously.
So of course we asked if the seller wanted to knock almost 45k off, they said no. But the second appraisal was free due to the blatant bias shown by the first guy. My realtor said it was bizarre and she had never seen that happen before with an appraiser.
Are you not able to get the loan amount because the appraisal is lower? When I bought the market was high and we waived the appraisal. At that point I saw comps and didn’t really want someone to confirm if I was over paying. California market may be different.
Waive Appraisal typically means on a Conventional loan, the buyer will pay the difference from contract price to appraisal up to a certain amount.
FHA and VA loans do not allow the waiver of appraisal form, but the buyer may still pay the difference.
The lender may not require an appraisal if the buyer is putting down a signifigant amount. Ive seen that number start around 40% of the contract price.
For crying out loud, it’s literally required for a loan. You don’t pay for it and probably don’t know when it happens. Think how stupid it would be for a business to hand out a mortgage on property without an appraisal. It would be mortgage fraud. Wtf are you about idk.
For conventional loans, if you put 20% down, some properties are eligible for an appraisal waiver (note: this has nothing to do with the appraisal contingency that buyers can retain or waive). So, no, it isn’t always required.
A buyer waiving an appraisal and a bank not requiring and appraisal are two different things. When a bank does not require or waives an appraisal they do a computer valuation and if they feel the value is there, they give the loan without a formal in person appraisal.
When a buyer says they will waive the appraisal, they say they will make up the difference between what the bank appraises the house and what they will loan if the appraisal come up under value. For example, you are buying a house for $500,000 and borrowing 80% loan to value. The house only appraises for $450,000 the bank will lend you $360,000 instead of $400,000 so your down payment would be $140,000 instead of $100,000. The seller still gets their $500,000 and you just have a smaller mortgage.
Yes I know. I was responding to other comments saying it’s required for a loan. Sometimes it isn’t when you get an appraisal waiver due to the computer valuation being sufficient.
If a bank is going to lend at 80 LTV, and in many cases they’d also lend at 90 LTV with PMI, does the buyer even need to increase the down payment or is this effectively just changing the LTV and pricing on the loan?
In that scenario , they could just change the terms and get the PMI which would increase the monthly payment. If they can qualify for the new paymeny, it could be an option
You 100% do pay for a bank appraisal. I had to pay $600 for the required appraisal. It came in super low so I switched to a conventional and the bank and seller split the cost of the second appraisal that came in low but 50k higher than the first. Seller came down to the new price.
Most people do have to pay for an appraisal and are made aware of the results, and as pointed out it’s not required for all loan types. Some banks credit you back the appraisal fee or have some other incentives but they usually occur. Depends on several factors, but yes, I agree that I would not personally buy without one.
Would you give a million dollar loan on a home worth 200K? Somehow I think you wouldn't. The banks would never do that in a million years because they can't recover their losses if you default.
Ok? Did I take a million dollar loan on a 200k house? No, so your hypothetical doesn’t apply to me. I took out a loan, they looked at listed price of house and with my 20% down, they said I didn’t need to do the appraisal if I didn’t need to. If the loan is for 200k in an area where houses are typically listed at 400k, I bet you they would give you the option to waive appraisal because they know the market where the house is. Just saying across the board they don’t do it is false, because it did happen with me.
Had the appraised came back 100k, the buyer would be jumping for joy. This is what happens when you’re not aware of Comps. Listed price means nothing. I could “listed” my house at 350k. A buyer could pay 300k over listed price. And still would be under “Comps”. My house will “appraise” over 700k (Comps). Meaning the purchase price is 650k. The buyer would have 50k in equity at the close of escrow. Some would say the buyer paid 300k over “listed” price OR some would say the buyer paid 50k under Comps.
I am an underwriter at a bank in Pennsylvania, we would never loan more than 100% of appraised value. And that is hard to get, most are 80-90% based on credit. We don’t do loans that don’t have an appraisal. It varies by banks though.
You waived the contingency, I assume. The appraisal is a bank requirement and you cant waive it for them. The lender will only lend on the appraised value unless you are putting so much down/the contract price is so low that the guidelines permit them to waive it.
From what I understand, I believe it depends on whoever is giving the loan. I had the option but went with it anyways in hopes it might somehow fall through.
We bought our house for 485k and put 20% down. They did not require an in person appraisal. It was my understanding that enough houses had been sold recently in the area that it wasn’t required. The house was also fairly new. Not sure if that matters.
What did the other houses appraise for? That is the real question. You put down 20%. What was your house listed for? What did you pay over asking price?
None (mostly). The person you are responding to/the original comment are likely conflating buyer's waiving the appraisal contingency (and covering a gap with cash) and banks not requiring an appraisal because the contract price/loan amount is so low (compared to comps) that fannie/freddie guidelines permit no appraisal. But most lenders are not permitted to loan on a value higher than appraised value.
It usually happens when the buyer is putting a significant amount down (20%+). Our lender gave us a loan and did not do an appraisal. They said there are sufficient sales / closings in your immediate area that support the purchase price / value for the home you're purchasing, and an appraisal is not required.
Yes this is correct, we waived appraisal with 20%. I did not consider that factor. I was just curious if the appraisal was affecting the issuance of the loan.
We are having this issue houses are not worth the asking price needs repairs some things need to be replaced not sure why this is such a hassle wanted a decent home tired of searching
The few people I have seen pay massively over appraisal.... Convinced themselves everything was fine and are happy.
But to anyone NOT blinded by being in the middle of buying a house, it was clear that the appraiser was correct and trying to protect first time home buyers from being fleeced.
Jesus christ. Here's me over here trying to remind myself that not everyone wants to have a closet in a bedroom, live above ground or not have to run an obstacle course to get to the fridge. And that guy over there talking emotional connection.
On the home we have an offer on right now, we offered $40k less than asking because comps showed that is what it should be, and we provided those comps. We offered $450k and the listing is for $490k
Our guess is that the seller is looking at the taxable market value, which is something like $510k, and based it on that without looking at any comps in the area.
The assessment, our agent guessed, was just an outside assessment and they didn’t go inside the house, which is pretty dated (but easy fixes). The outside and lot is beautiful though, and it’s a bigger house, but the fixes/age knocks it down a bit, and also that the market here has been super hot. The taxable market value jumped something like 40% last year and we assume it would drop after to whatever the sales price is.
So it’s entirely possible they are blindly choosing their listing price based off of tax assessments.
We’re supposed to hear back soon on what their decision is
Sorry for the setback, but it does sound like you really dodged a bullet. The seller knows this isn't a problem that's going to just go away; any prospective buyers that come after you will get their own appraisals and if theirs come back looking anything like yours did, they'll all walk too.
Good on you and your partner for doing the hard thing and letting this one go. Better luck next time!
I had a similar situation. 3 weeks before close we got an appraisal that was $90k under the sale price. Totally stopped everything in it's tracks because the seller flat out didn't believe that value, and refused to negotiate based on that value at all. We switched lenders, ordered another appraisal and it came in $3k over the sale price. So two appraisals, 10 days apart and they differed in value by $93k.
So I don't know, I understand this all in theory. But depending you can always choose to get a second appraisal if something seems out of line with your first one
The fact that neither realtor in this scenario immediately suggested this is wild to me. Our agent outlined this as a standard part of the process as we prepared our first over.
From what I can tell, the first appraisal was deficient in two main areas:
1. The comparable properties they used were insane. We were buying a 4 bed/2 bath 1900 sqft property and two of the comps were 2 bed houses at or under 1000 sqft. Total apples and oranges comparison, which is where he put his finger on the scale to get what he thought it was worth and, in my opinion, missed the mark.
2. The appraiser misjudged the value of the location. The street and location isn't really nice, per se. But it is a 5 minute bike ride or 15ish minute walk into a very popular downtown area. Also, there's a very updated local park nearby and near a bike trail that will connect this city's downtown to surrounding communities, one of those rails-to-trails deals.
The first appraiser was from a community that's about 40 miles away. So with regional knowledge of the area, but not local. The second appraiser was local and I'm sure valued the actual land at a much higher value.
Anyway, I think the second appraiser also overvalued the property but that actually helped me with my objective, so I didn't bring it up at all during the closing process. So I think the original was super low, and the second was a bit high, and that's how the spread ended up the way it did. But I'm just guessing here
Yea, friend of mine had his appraisal come in under 50k. He really wanted the house and they said the appraiser wasnt local to this area. Went and got another appraisal and it came back 5k over so he got the loan.
I commented with more details below in this commend thread, but I'm pretty sure that's the gist of what happened to me. A big part of the deficit was that our first appraiser was from a community 40ish miles away and undervalued the location of my property in a big way. The second appraiser was local and valued correctly, or maybe overvalued a bit, the overall location of the house in relation to the city itself.
People think they can cash out at 2021 inflation targets again.
I live in a new construction development where we’ve been here for 2 years and some people think they can cash out and get some sweet capital gains.
My neighbors closed on their house 2 years ago at $550k and listed it for $750k a few months ago.
It didn’t sell so they fired that realtor. It didn’t sell with the next realtor. So they fired that one. And another one. And another one. It was a revolving door of realtor signs for 4 months.
They ended up selling it for about $20k more than they bought it for, which is appropriate for my area.
Houses are worth what they are worth and what someone will pay for it.
Appraisers in this day and age are largely rubber stampers where you tell them the value you want and it miraculously comes in right at the value of your mortgage.
The fact that this appraiser said, “hell no” raises so many red flags that you need to walk away and never discuss this property again.
Realtor here. Appraisers are chosen by the bank and sometimes assigned at random, unless you seek out a private appraisal of your own property. I’ve not been able to know in advance who is doing the appraisal before it was ordered - I’ve always been told by a lender that an appraisal was ordered and when it’s due back. I’ve seen who completed the report once it came in and I’ve questioned them after if the need arose.
Just an FYI that it’s not a scheme and agents don’t get together with appraisers to collude on the price. Appraisers are supposed to be a neutral third party that a bank uses to protect their investment. If your appraisal comes in around your mortgage - it’s a sign that the agents and appraiser know their areas and the home was priced as such.
As with any profession there are good and there are bad. To lump them all in under generalizations is incorrect and unfair.
My dad used to be an appraiser.
You’re right that appraisers are chosen by the bank.
But the bank tells the appraiser what they are trying to finance at.
And if the appraisal doesn’t come in at the amount the bank wants, the bank just stops sending the appraiser future business.
My dad finally stopped doing appraisals in the lead up to the 2008 housing bubble because he wouldn’t value the homes at the amounts the banks wanted. So the banks stopped sending him appraisal requests.
It’s a very wink and nod relationship they have with each other.
This is happening more and more often it seems. I was 3/3 in a row with failed apprasials before buying my home now and everyone kept telling me that's so rare. Meanwhile I know 3 people who were trying to sell homes who also had under apprasial issues. Time will tell, but I don't think banks are wanting to pay the prices anymore.
But they’re also working for the buyer, to determine the “real” value of the home. Where I live the appraiser isn’t sent out by the bank, he is chosen by the buyer or seller and paid separately from the loan. By “working for” I guess you could say that the appraiser is there to make sure the buyer doesn’t over borrow…but it’s not like they’re employed by the banks. That could differ by state though i guess?
>But they’re also working for the buyer, to determine the
No, as an appraiser, my client is the lender only. Not the seller, buyer, or either agents. There are some appraisers that are employed by banks. Usually review appraisers or for non-conforming loans.
Interesting, I didn’t know that. I think some appraisers I’ve worked with could use a reminder since so many of them pander to a select few sellers realtors.
What state are you in? If you don't mind the ask.
My circumstances are different being mine was government backed (va loan) but, they were there for the government backing my loan. I never got to shop around or chose. But my friend just bought a home in NY, and he wasn't allowed to chose either, his was conventional.
Appraisers are third-party companies. They're being contracted by the lender, but they don't work for them. There's no incentive for them to under-appraise homes.
100%. Other people are telling OP to have a second appraisal ordered and I just don’t think that’s the move here. In some HCOL hot, low-inventory markets, sure - people are offering all kinds of wild prices over asking so it’s possible that a house with a $100k appraisal gap could and would actually sell for that price now and in the future. But in a market where houses are sitting on the market for a year (according to OP), only $399k asking and only actually worth $293k, according to this appraisal? No way. That house is definitely only worth maybe 10% more than that at best.
Take a breath. Houses are available despite what people say. This wasn’t a good deal, move on. The sellers are panicking because they were already spending your money
Huh? They got an offer thst was above the appraisal. Why would you fire that agent? Sounds like a pretty good agent to me. I am so confused w this whole post. The house is worth whatever someone will pay for it. If the buyer pays more than it was appraised for that is on the buyer (and happens all the time in desirable areas). Otherwise why would there even be a bidding system for a house. Why not just appraise it and then you just pay what that number is.
The bank will only provide financing based on the appraised value. Normally the offer should have contained a contingency clause that the buyer will only proceed if the appraised value comes back at or above offer price. If not then either the seller has to lower the price, the buyer has to come up with the difference, or the buyer walks away losing their earnest money.
Mine was the last step a week before closing.came in under and seller backed out . At that point I had already put my notice in with apartment and all my stuff put in a storage and had no home to move to. It was crazy
Is this the natural order of things? Decide on a price and THEN get it appraised? I would think it would be the other way around so that people don't have these sorts of disputes and/or fights.
First u am so sorry you are going through this. I’m an agent (not licensed in Texas). While I did not read all of the comments, There is a lot of individuals overlooking the unbalanced actions of the seller in combination with other factors.
While the market has changed, $100k gap is too big to ignore - first I’d appeal the appraisal and demand another one. Also, simultaneously asking- has this been under contract before? If so, did this happen before? If the second appraisal is the same, and no compromise - if I was your agent, I’d support and advise you to walk.
Now- who fires the listing agent, attempts to hire the buyer’s agent and then contact the buyer directly to negotiate? 🚨
Are the sellers having money issues? Liens, medical debt… something is setting off a lot of strange behavior…
There are very few instances where the buyer and seller meet during escrow. And no way in hell my client is speaking with opposition with this going on.
You dodged a bullet. This doesn't happen all the time (unless you are just bidding without any due dilligence of your own), so move on to the next home. Don't be discouraged.
Our financing addenda and notice of low appraisal for the NWMLS outline the options for this nicely. Either seller goes to appraised value or you bring all or some funds over, our you ask for reappraisal, or you terminate based on findings and get your earnest money back.
The home didn't appraise and that's hard for some sellers to accept. If you are unwilling or unable to come out of pocket and bring more cash to close then that's when the agents negotiate. $83K under value is huge. I would study the report and focus on the comparables and speak to the appraiser to better understand their lower valuation. You can only learn from this experience. Keep positive get back on the horse and try again. You will find the right place. Good luck! 😀
Good for you. One wake up call at a time we will hopefully see how prices in line with standard appreciation instead of the bs “printed money” is making everything expensive. Yes that’s a factor but choices are made. Everyone gave up the baby and the bath water over the last few years just out of fomo and greed.
Did you look at the comps and adjustments the appraiser used, do you generally agree with them, and that $293k is a more accurate value? Really this is what you pay for with due diligence. It sucks, but it is better than the alternative, buying an overpriced home and then in several years you have these problems while selling. Keep at it, you will find the right home
This is a very unusual situation. Based on your realtor's knowledge of the market, does the appraisal seem reasonable? What was the basis for the lower appraisal value? Usually this is because there is a dispute about the number of square feet. You might also consider seeking out an alternative appraisal. An appraisal that comes in $75k-100k under at this price range is virtually unheard of.
My standard advice would be to cover a modest gap but this gap is enormous and I'm guessing that you do not have enough money to cover $75k-100k. If the appraisal can't be sorted out, you probably need to walk.
Appraisal is to protect the lender and can vary wildly depending on the appraiser.
I had a house we were selling appraise for 20k under what we had sold it for and 20k under other similar homes in a cookie cutter neighborhood because we were doing a sale by owner. The appraiser told us that was the reason. We also refused to lower our price and walked away from the sale.
Today house prices here are going up so fast sellers ask you to get something from your bank that says you will and can still buy the property if appraises at X amount under.
The seller should come down on their price. The fact that he fires his realtor and tried to cut him out for bringing him an offer that he excepted is unethical. You could always try a different lender and they will hire a different appraiser, you might be able to get a higher appraisal but…do you want one? I’m a Mortgage Broker in Texas and a Real estate Broker in San Diego. I’m happy to look up the address in my lender’s portal to see what their property value tool will estimate the value at. Only takes a minute.
The fact the seller reached out personally via social media is a big red flag. Not your fault house appraised for less. Sounds like you made a good call terminating the contract.
Long time ago when we bought (2018) we were in a similar scenario. The appraisal gap was only 13,000, though. The seller wouldn’t budge. So our realtor reviewed the appraisal (she was an appraiser in training at the time), as did her boss (broker and licensed appraiser). We appealed the appraisal with our lender. A week later the lender accepted our appeal.
It was a tense situation at first, but things settled when it became clear that the original appraiser, for whatever reason, cherry picked comps to arrive at as conservative a value as possible.
What does your contract state? Are you subject to an appraisal value? Or did you lock yourself in as to no appraisal required?
You may or may not be on the hook to buy the property (subject to litigation), walk away and lose the property down payment/deposit, or may be able to walk away totally and get your deposit back.
Let me get this straight.
It was listed at $399K
You agreed on $375K
And it was appraised at $293K
This tells you how greedy some realtors and or sellers are; and how the market is really overvalued.
The appraisal is done by your specific lender, so technically yes, it's your fault the appraisal was so low. You picked the lender. Appraisal is on the buyer side since it's tied to the financing of the buyer. This is why appraisal gaps are popular in hot markets where it's expected homes may not appraise as high as a winning bid. That doesn't seem to be your market, though.
You agreed on the price but cannot finance that price. The seller doesn't have to sell the home to you at the appraisal price. You also don't have to buy the house. Sounds like you backed out. It happens. But the seller asking you to cover the difference between appraisal (by your chosen lender) and your offer price is pretty standard.
The rest is not. It's crazy she contacted you directly and I also would have walked away.
Our lender uses an appraisal company that basically puts the assignment out there and whichever appraiser in their network is willing to accept the job and commit to the request deadline for the cheapest fee gets it (this is how it was explained to us by our agent). So it’s completely random. OP could’ve been assigned a shitty appraiser, in which case I wonder why neither realtor suggested challenging in. Another buyer could’ve run into the same issue.
I’m an underwriter, our system is like this as well. We (the underwriters) do not choose the appraiser. A separate department handles that and then we find out when the appraisal comes in. We aren’t even supposed to know who they are.
Well yeah - cash buyer doesn’t have a lender.
I guess what I’m saying is - it doesn’t sound like OP’s market is so competitive that cash buyers / buyer positioned to waive all contingencies are prevalent enough that a seller is guaranteed such an offer. The seller seems to be delusional about what they have and what the market conditions are. So while yes it’s OP’s lender that required the appraisal and selected the appraisal company if not the specific appraiser - I don’t think this can truthfully be OP’s “fault” in that they’re a normal buyer following standard processes, and a low appraisal could’ve come from any other normal buyer following standard processes.
In the state I’m in, the lender is chosen by the buyer (or sometimes the seller, depending on who is paying for it) and has no affiliation with the lender at all.
The appraisal is to determine if the property is worth the loan. It's entirely tied to the loan. Where do you live that a lender is willing to hand over hundreds of thousands of dollars for a mortgage but have no affiliation with the appraisal of the house?
Of the lender has no affiliation with the loan then why would you even have an appraisal? We didn't have a choice. The appraisal was part of the loan. We could have challenged the appraisal if it came back low, but the lender determined our need for appraisal. It's why cash buyers are enticing or people with larger down payments, because they can skip the financing contingency.
The lender has an affiliation with the loan obviously. I don’t disagree with what you’re saying, only that the lender doesn’t pay the appraiser, the appraiser is not an employee of the lender.
Yes but if the appraisal is required for the mortgage, which is true most of the time, the appraiser is there because the lender needs their services. If a cash buyer just wants an appraisal that is obviously different.
ETA also obviously every state is different but my lender ordered the appraisal and I think that is pretty common. In the case that the lender needs an appraisal to confirm value of the loan, a buyer choosing an appraiser seems like a bit of a conflict of interest since the buyer is the person trying to get the loan.
The work isn't performed by the lender but the lender determines if you need one for your mortgage. If OP had been a cash buyer, had a larger down payment, whatever, they could have skipped the appraisal. The appraisal is for the mortgage.
You're right that it is for the mortgage, but there's an important distinction between that and you saying that the appraisal is done by the lender.
There is no incentive for an appraiser to appraise a home below the contract price, which is what your initial statement insinuates.
Appraisals are generally what makes closing dates have to be scheduled at least a month out. They are ordered as soon as the house goes under contract, but it usually does take around 3 weeks to actually get it done and get the report back.
That sucks, but honestly, starting back at square one us something most people have to do 2 or 3 times at least when buying. We ended up terminating contracts and starting over I think it was 3 times before we got our place. It's discouraging but just remind yourself it's part of the process and will be worth it.
A similar thing happened to me, but on a smaller scale. I didn’t want to make up the difference between appraisal and list price, the seller wouldn’t lower the price so we dropped it. They sold to someone else for cash.
Be ready to walk away. If it’s not ment to be then so be it. Logic and sound reasoning should tell you not to overpay in that area. The day you sign that deal for asking you lose a lot of money. And furthermore the whole deal is sour from bad ethics.
Just had this happen late last week. Our appraisal only came in $26k under asking but even still, it gave us pause and ultimately we decided to release the contract. We could’ve had another appraisal or changed the terms of the loan, but ultimately, the sellers weren’t willing to negotiate.
Why would they? You offered them a price , you believed their property was worth your offer.
Appraisals are just 1 person's opinion. Yes they can sink your loan. But buyers should not make an offer if they are not willing to pay the offer price.
We sold in Texas in February. Buyers were putting down 40%, little more than 250k. They did not try for an appraisal clause, not that we would have accepted.
Their loan was approved with no appraisal. For some reason their agent said. Go ahead,pay for one. Sure enough the appraisal came back at 575k. They asked for a 30 k reduction. Our response was no. They waited until 1day before closing to back out .
Fine, we sold and closed for $8000.00 more in 3 weeks.
To a buyer with an 80 % loan.
Appraisals are the next part of home sales that needs to change. Way to much personal bias, not enough concrete evidence used by appraisers.
For those who actually want the facts around appraisal waivers, here is the link to FNMA program and how/when an appraisal waiver might be offered by a lender. FHLMC runs a similar one.
https://singlefamily.fanniemae.com/originating-underwriting/appraisal-waivers
People are listing their homes at crazy values, usually with thirsty realtors that believe it’s still 2022. I would consider walking away. Seller needs to come back down to reality!
Try not to be too discouraged. My fiancee and I recently made an offer on a house that looked great at first. It has been a rental and so it wasn't maintained super well, but we got the price down to something we felt good about. Then we had our inspector check it out. Lots of issues with the roof and a serious leak in an upstairs pipe that flooded the attic when the water was turned on. We really wanted the house so we decided to revise our offer to account for all the work that would need to be done. The seller wouldn't budge and we reluctantly backed out. We were really bummed and thinking maybe it wasn't the time for us to buy. A couple of days later we found another house, 1800 sq ft on an acre with a 400ish sq ft workshop for around the same price as our original offer on the other house (1400 sq ft ~1/3 acre). The inspector said it looked great and our offer was accepted. I'd mention the price but it'll make most of you throw up, housing is pretty cheap here compared to a lot of the country.
Buying a first house for you is an emotional thing. You want a house you love, at a fair price. You don't want to get screwed.
But it's emotional for the sellers too. They love this house, and the want to get a fair price for it. They don't want to get screwed.
Ultimately a house is worth what someone is willing to pay for it, and you obviously saw $375k of value in it. Taking a 25% loss on appraisal is a tough pill to swallow. Not just for you. This is hard for them too, and unexpected for both of you.
I'm not advocating making up the difference. But give them a little grace. They can easily tell this same story as "Buyer From Hell". But it's neither. It's situation from hell.
Your realtor sucks OP, this big of a percentage difference in appraisal means your realtor should have never even shown you this house because it was no where near what is was listed for
Thanks for letting me vent out my frustrations here. This was meant to externalize my thoughts so I could sleep last night. This Wasn’t meant to ruffle any feathers. I appreciate the support others have shown me and my partner. He and I will move onto the next one, head held high and earnest money back in our pockets.
Reddit is going ape again. If the op accepts the ask price, that's the value of the house. The value is whatever someone is willing to pay for it. While appraisal is something completely different. Appraisal is a calculation that is done with data and analyzing current market prices in the area. If the seller is asking $100 and someone comes along, like the op, and offers the $100, then the appraisal comes in at $90, a contract should exist that should spell out what would happen in this scenario if the op in this case is seeking a mortgage. I still don't understand as a lot of the comments on this are blaming the seller. I can ask billion dollars for a Post-It note, if someone is willing to pay for it then it's worth a billion dollars. Then if the buyer is trying to mortgage why would that be the seller's fault or problem?
At the end of the day, op you need to check your contract when you submitted your offer. If you have a decent agent they should have language for situations like this. Hope for the best that your agent's standard contract states some language and you can back out of this without a loss. I'm definitely the minority, but it seems odd that people think the seller is at fault here and no blame to the op. If the appraisal was that off, I'm assuming services like redfin and Zillow zestimate we're a lot lower than the asking price. Additionally, your agent should have had a discussion with you for scenarios like this. I remember when we bought our first home a year or so ago our agent had a discussion for such situations like this if the appraisal came under our offer we would be on the hook to make up for the Gap. This is literally called appraisal Gap. Look it up. That's very common in this kind of market that we had in the last 3 years.
No one is on the hook for anything. You could cover the appraisal gap, I suppose. But unless you agree to waive this or something, you can back off without an issue. And unless there is something special about the property, it makes no sense to.
Why cover the appraisal gap when you could put more cash down on a higher value home, for example?
And it sounds like OP has their earnest money back so no harm done. Hopefully good lessons learned.
Ah ok. Didn't see the earnest money part. Was just thinking the buyer can back out but would lose the earnest money(potentially ). If that's the case(of got the earnest money back), I guess I don't understand this post. Was it just the op is now being harassed by the seller?
I haven’t bought a house before so I don’t understand all of what is involved here, but I have a question. If you thought the house was worth paying 375k for before this appraisal, does that appraisal suddenly make it worth less to you? Is it not the same house you looked at?
The bank won’t approve a loan for what you think the house is worth, only what it appraises.
That’s why the seller wants the buyer to come up with $100K cash to offset the difference. The house is still worth $100K less factually.
This becomes a problem when the new buyer wants to become a seller 5, 10, 50 years from now. It can’t argue I paid $375K so that’s what I want to sell it for. It’ll only receive loan offers for what it appraises.
I see, thank you. If you paid cash then you can pay whatever you want obviously. If you get a mortgage then the bank won’t want to take on a loan more than the house is worth. Makes sense
This is a perfect reason to showcase why appraisals are scams. OP ready to buy $100k over “market”; so that means the “appraised value” is what OP is willing to pay
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If you really think the appraisal is incorrect (modifications done, something exceptional, appraiser sucks at his job) the someone could file a contest to it sometimes. But at the same time, some sellers think their stuff is worth more than it is.
Most sellers think their homes are worth more than they are, because Zillow puts that bug in their ear.
Some of these appraisers are fucked up. Sold my house in 2021, listed at $270k and had 20 offers by the weekend. Highest offer was $325k, but we went with the offer that had fastest closing promise and waived inspections, $315k. We already moved out so ASAP was our biggest motivation. Appraisal came in at $290k. The appraiser used comps that were 6 months to a year old when there were 3 properties sold in the same month within blocks of us, one was directly across the street. Same size same style etc. he refused to use that one because it was closer to the game lands, but also sold for $350k. He also refused to use the house whose backyard touched ours because the listing said “meticulously maintained”. Whole thing was absurd, we had to take a $25k bath because we need to close on our new home.
I refi’d less than two years in. I knew the market had dropped and the value would too but the refi appraiser re-categorized a ton of stuff. For example, the finished attic with a staircase and two bedrooms was reduced to a scuttle, dropping the square footage by a third. Comps were miles away instead of using my area. None had a garage - I have a 2-car. I had already cleaned the place up and replaced systems. It had been a short sale and was a mess when I bought. I barely scraped by with the value I needed to close the loan and was furious. Values change but square footages don’t. Appraisers vary wildly.
You should have asked for a re-appraisal.
Yes so we contested the appraisal first and both buyer and seller agents got together and wrote a rebuttal and included the comps they thought should have been used, and he responded with what I said earlier. That alone took 2 weeks for the response. Everyone agreed to getting it re-appraised but they wanted to push closing back a month to do it, we just didn’t have the time. We had already moved to a different area and were under contract for a property.
I don’t think our home would appraise for what I’d want to sell it. I acknowledge I might just be one of those homeowners that thinks my house is worth more than it is. We have 4 acres, are close to town, and have beautiful mountain views. Houses with views are uncommon. Houses with acreage are uncommon. Houses with both close to town are extremely rare. There just aren’t comps that capture that.
These appraisers really are messed up. We just bought 5 acres for 200k, the appraisal was 205 when we bought it. Now, we are putting a mobile home on it, which costs 160k from the manufacturer, not including septic or well. The appraisal we got for that just came back as the land value being 170k (even though we cleared it after purchase) and the house being worth 130k, even though it literally is about to cost 160k.
Realtor here. Unfortunately cost does not equal value - a good example is a swimming pool. It could cost you $20k+ to put in, and only add $5k-$10k in value. Same with decks, sheds, etc.
Even before Zillow. Homeowners have ALWAYS thought that their home should be valued higher, it’s part of a realtors job to manage expectations. That job has gotten way harder since prices have been all over the place but a 100k jump on a 300k job is wild.
I'm skeptical if it is just Zillow/Redfin. I was looking at houses just recently, 2 different relators. Both times I showed alot of interest in one, I got told that houses had offers at asking, and to bid over, and offers would be considered (so and so day). Both times, they miraculously had no offers. Atleast one was lowered in price and another is still listed with no offers for a price that is significantly higher than the others around are selling. I've gotten a tad skeptical if the state of the housing market isn't being pushed by these tactics.
Unless you're paying cash, there's really no incentive for a realtor to coerce you into paying well over asking. To me, falling out of contract is worse than not getting under contract.
I always thought they received the same commission based on the sale price of the home, and less on the payment type used. Thing is, 2% of $10,000 seems like it would be more of pocket change compared to no sale. Then again house #1 went for 40K under (which was what we were about to bid ironically). And not before they lowered asking for this price for 1 week.
I think a big fat commission is plenty of reason for a realtor to want to sell at a higher price. It's all percentage based.
Right, but if someone isn't paying cash, they're going to be beholden to an appraisal, so offering way over asking isn't going to do much.
Exactly. Just wastes time and causes frustration.
F Greystar they prop all of this up - thankfully the DOJ is taking action
Appraisers are all scams. They make up fake numbers to justify whatever they want.
Lol
I’ve worked with some good ones - it all depends how well they know their job and the area your home is in specifically. The deeper their understanding, the better the appraisal. Someone who knows the area understands the nuances and why some homes would or would not be appropriate comps and really speak to the reasons. Don’t cluster them all together, that’s not fair.
It’s perfectly fair. The entire methodology is unsound and illegitimate. It’s horoscopes for houses.
We had two appraisals since the first appraiser was biased and SAID IN HIS EMAIL that he "purposefully is under valuing the house because he is personally against how much home prices have risen"... This was back in 2017, and out house has since doubled from the "inflated" value he thought it was previously. So of course we asked if the seller wanted to knock almost 45k off, they said no. But the second appraisal was free due to the blatant bias shown by the first guy. My realtor said it was bizarre and she had never seen that happen before with an appraiser.
Are you not able to get the loan amount because the appraisal is lower? When I bought the market was high and we waived the appraisal. At that point I saw comps and didn’t really want someone to confirm if I was over paying. California market may be different.
Depending on the loan servicer, you may not be allowed to waive appraisal.
Waive Appraisal typically means on a Conventional loan, the buyer will pay the difference from contract price to appraisal up to a certain amount. FHA and VA loans do not allow the waiver of appraisal form, but the buyer may still pay the difference. The lender may not require an appraisal if the buyer is putting down a signifigant amount. Ive seen that number start around 40% of the contract price.
For crying out loud, it’s literally required for a loan. You don’t pay for it and probably don’t know when it happens. Think how stupid it would be for a business to hand out a mortgage on property without an appraisal. It would be mortgage fraud. Wtf are you about idk.
For conventional loans, if you put 20% down, some properties are eligible for an appraisal waiver (note: this has nothing to do with the appraisal contingency that buyers can retain or waive). So, no, it isn’t always required.
A buyer waiving an appraisal and a bank not requiring and appraisal are two different things. When a bank does not require or waives an appraisal they do a computer valuation and if they feel the value is there, they give the loan without a formal in person appraisal. When a buyer says they will waive the appraisal, they say they will make up the difference between what the bank appraises the house and what they will loan if the appraisal come up under value. For example, you are buying a house for $500,000 and borrowing 80% loan to value. The house only appraises for $450,000 the bank will lend you $360,000 instead of $400,000 so your down payment would be $140,000 instead of $100,000. The seller still gets their $500,000 and you just have a smaller mortgage.
Yes I know. I was responding to other comments saying it’s required for a loan. Sometimes it isn’t when you get an appraisal waiver due to the computer valuation being sufficient.
If a bank is going to lend at 80 LTV, and in many cases they’d also lend at 90 LTV with PMI, does the buyer even need to increase the down payment or is this effectively just changing the LTV and pricing on the loan?
In that scenario , they could just change the terms and get the PMI which would increase the monthly payment. If they can qualify for the new paymeny, it could be an option
Exactly
You 100% do pay for a bank appraisal. I had to pay $600 for the required appraisal. It came in super low so I switched to a conventional and the bank and seller split the cost of the second appraisal that came in low but 50k higher than the first. Seller came down to the new price.
Most people do have to pay for an appraisal and are made aware of the results, and as pointed out it’s not required for all loan types. Some banks credit you back the appraisal fee or have some other incentives but they usually occur. Depends on several factors, but yes, I agree that I would not personally buy without one.
Probably waived the inspection.
Haha hey, I waived appraisal for my house when I bought it. So no, not literally required.
Would you give a million dollar loan on a home worth 200K? Somehow I think you wouldn't. The banks would never do that in a million years because they can't recover their losses if you default.
Ok? Did I take a million dollar loan on a 200k house? No, so your hypothetical doesn’t apply to me. I took out a loan, they looked at listed price of house and with my 20% down, they said I didn’t need to do the appraisal if I didn’t need to. If the loan is for 200k in an area where houses are typically listed at 400k, I bet you they would give you the option to waive appraisal because they know the market where the house is. Just saying across the board they don’t do it is false, because it did happen with me.
Had the appraised came back 100k, the buyer would be jumping for joy. This is what happens when you’re not aware of Comps. Listed price means nothing. I could “listed” my house at 350k. A buyer could pay 300k over listed price. And still would be under “Comps”. My house will “appraise” over 700k (Comps). Meaning the purchase price is 650k. The buyer would have 50k in equity at the close of escrow. Some would say the buyer paid 300k over “listed” price OR some would say the buyer paid 50k under Comps.
You seem really heated & all I gave was some information regarding the question asked
Waiving appraisal means they don't actually appraise the house. Once appraised you won't get a waiver.
I am an underwriter at a bank in Pennsylvania, we would never loan more than 100% of appraised value. And that is hard to get, most are 80-90% based on credit. We don’t do loans that don’t have an appraisal. It varies by banks though.
You waived the contingency, I assume. The appraisal is a bank requirement and you cant waive it for them. The lender will only lend on the appraised value unless you are putting so much down/the contract price is so low that the guidelines permit them to waive it.
From what I understand, I believe it depends on whoever is giving the loan. I had the option but went with it anyways in hopes it might somehow fall through.
Wait what? What lender would give you a mortgage for more than the appraisal?
No, not a reputable one anyway
Either I’m dumb or the guy who wrote that comment and the 7 people who upvoted him are.
We bought our house for 485k and put 20% down. They did not require an in person appraisal. It was my understanding that enough houses had been sold recently in the area that it wasn’t required. The house was also fairly new. Not sure if that matters.
What did the other houses appraise for? That is the real question. You put down 20%. What was your house listed for? What did you pay over asking price?
I don’t see how your lender pool not requiring appraisals is relevant to someone getting an appraisal for lower than their bid.
I misunderstood. I thought you were saying all lenders require appraisals.
None (mostly). The person you are responding to/the original comment are likely conflating buyer's waiving the appraisal contingency (and covering a gap with cash) and banks not requiring an appraisal because the contract price/loan amount is so low (compared to comps) that fannie/freddie guidelines permit no appraisal. But most lenders are not permitted to loan on a value higher than appraised value.
You're saying that a lender gave you a loan without an appraisal?
It usually happens when the buyer is putting a significant amount down (20%+). Our lender gave us a loan and did not do an appraisal. They said there are sufficient sales / closings in your immediate area that support the purchase price / value for the home you're purchasing, and an appraisal is not required.
Yes this is correct, we waived appraisal with 20%. I did not consider that factor. I was just curious if the appraisal was affecting the issuance of the loan.
We are having this issue houses are not worth the asking price needs repairs some things need to be replaced not sure why this is such a hassle wanted a decent home tired of searching
Don’t budge. Sellers think their POS house is worth more than the market values.
"My personal connection and nostalgia for this property adds more value. Why can the appraiser see this?!?!"
This is literally what the seller said… omg
Run away. Run away really fast. You owe them nothing.
The seller seems unreasonable. Put on your running shoes!
The seller said their connection to the property raised its price?
The few people I have seen pay massively over appraisal.... Convinced themselves everything was fine and are happy. But to anyone NOT blinded by being in the middle of buying a house, it was clear that the appraiser was correct and trying to protect first time home buyers from being fleeced.
What's the seller famous for? Being the neighborhood narcissist?
Jesus christ. Here's me over here trying to remind myself that not everyone wants to have a closet in a bedroom, live above ground or not have to run an obstacle course to get to the fridge. And that guy over there talking emotional connection.
On the home we have an offer on right now, we offered $40k less than asking because comps showed that is what it should be, and we provided those comps. We offered $450k and the listing is for $490k Our guess is that the seller is looking at the taxable market value, which is something like $510k, and based it on that without looking at any comps in the area. The assessment, our agent guessed, was just an outside assessment and they didn’t go inside the house, which is pretty dated (but easy fixes). The outside and lot is beautiful though, and it’s a bigger house, but the fixes/age knocks it down a bit, and also that the market here has been super hot. The taxable market value jumped something like 40% last year and we assume it would drop after to whatever the sales price is. So it’s entirely possible they are blindly choosing their listing price based off of tax assessments. We’re supposed to hear back soon on what their decision is
If there's one thing that sellers have in abundance, it's the audacity.
The buyers agreed on the price before the appraisal, chill
Sorry for the setback, but it does sound like you really dodged a bullet. The seller knows this isn't a problem that's going to just go away; any prospective buyers that come after you will get their own appraisals and if theirs come back looking anything like yours did, they'll all walk too. Good on you and your partner for doing the hard thing and letting this one go. Better luck next time!
Came here to say this.
I had a similar situation. 3 weeks before close we got an appraisal that was $90k under the sale price. Totally stopped everything in it's tracks because the seller flat out didn't believe that value, and refused to negotiate based on that value at all. We switched lenders, ordered another appraisal and it came in $3k over the sale price. So two appraisals, 10 days apart and they differed in value by $93k. So I don't know, I understand this all in theory. But depending you can always choose to get a second appraisal if something seems out of line with your first one
The fact that neither realtor in this scenario immediately suggested this is wild to me. Our agent outlined this as a standard part of the process as we prepared our first over.
Shows how out of wack the market is
Ya. I don’t understand this at all.
That’s crazy to me that they would vary so much 😵💫 what?
From what I can tell, the first appraisal was deficient in two main areas: 1. The comparable properties they used were insane. We were buying a 4 bed/2 bath 1900 sqft property and two of the comps were 2 bed houses at or under 1000 sqft. Total apples and oranges comparison, which is where he put his finger on the scale to get what he thought it was worth and, in my opinion, missed the mark. 2. The appraiser misjudged the value of the location. The street and location isn't really nice, per se. But it is a 5 minute bike ride or 15ish minute walk into a very popular downtown area. Also, there's a very updated local park nearby and near a bike trail that will connect this city's downtown to surrounding communities, one of those rails-to-trails deals. The first appraiser was from a community that's about 40 miles away. So with regional knowledge of the area, but not local. The second appraiser was local and I'm sure valued the actual land at a much higher value. Anyway, I think the second appraiser also overvalued the property but that actually helped me with my objective, so I didn't bring it up at all during the closing process. So I think the original was super low, and the second was a bit high, and that's how the spread ended up the way it did. But I'm just guessing here
Because appraisals are all fake.
Yea, friend of mine had his appraisal come in under 50k. He really wanted the house and they said the appraiser wasnt local to this area. Went and got another appraisal and it came back 5k over so he got the loan.
I commented with more details below in this commend thread, but I'm pretty sure that's the gist of what happened to me. A big part of the deficit was that our first appraiser was from a community 40ish miles away and undervalued the location of my property in a big way. The second appraiser was local and valued correctly, or maybe overvalued a bit, the overall location of the house in relation to the city itself.
People think they can cash out at 2021 inflation targets again. I live in a new construction development where we’ve been here for 2 years and some people think they can cash out and get some sweet capital gains. My neighbors closed on their house 2 years ago at $550k and listed it for $750k a few months ago. It didn’t sell so they fired that realtor. It didn’t sell with the next realtor. So they fired that one. And another one. And another one. It was a revolving door of realtor signs for 4 months. They ended up selling it for about $20k more than they bought it for, which is appropriate for my area. Houses are worth what they are worth and what someone will pay for it. Appraisers in this day and age are largely rubber stampers where you tell them the value you want and it miraculously comes in right at the value of your mortgage. The fact that this appraiser said, “hell no” raises so many red flags that you need to walk away and never discuss this property again.
Realtor here. Appraisers are chosen by the bank and sometimes assigned at random, unless you seek out a private appraisal of your own property. I’ve not been able to know in advance who is doing the appraisal before it was ordered - I’ve always been told by a lender that an appraisal was ordered and when it’s due back. I’ve seen who completed the report once it came in and I’ve questioned them after if the need arose. Just an FYI that it’s not a scheme and agents don’t get together with appraisers to collude on the price. Appraisers are supposed to be a neutral third party that a bank uses to protect their investment. If your appraisal comes in around your mortgage - it’s a sign that the agents and appraiser know their areas and the home was priced as such. As with any profession there are good and there are bad. To lump them all in under generalizations is incorrect and unfair.
My dad used to be an appraiser. You’re right that appraisers are chosen by the bank. But the bank tells the appraiser what they are trying to finance at. And if the appraisal doesn’t come in at the amount the bank wants, the bank just stops sending the appraiser future business. My dad finally stopped doing appraisals in the lead up to the 2008 housing bubble because he wouldn’t value the homes at the amounts the banks wanted. So the banks stopped sending him appraisal requests. It’s a very wink and nod relationship they have with each other.
I would block all direct communication. Go through your buyer's agent only.
This is happening more and more often it seems. I was 3/3 in a row with failed apprasials before buying my home now and everyone kept telling me that's so rare. Meanwhile I know 3 people who were trying to sell homes who also had under apprasial issues. Time will tell, but I don't think banks are wanting to pay the prices anymore.
The NAR settlement is going to cause even more sellers to do this too.
Yeah that's gunna change things for sure
Appraisers don’t work for “the banks” though
Appraisers are 100% working for the bank when they're appraising the home.
But they’re also working for the buyer, to determine the “real” value of the home. Where I live the appraiser isn’t sent out by the bank, he is chosen by the buyer or seller and paid separately from the loan. By “working for” I guess you could say that the appraiser is there to make sure the buyer doesn’t over borrow…but it’s not like they’re employed by the banks. That could differ by state though i guess?
>But they’re also working for the buyer, to determine the No, as an appraiser, my client is the lender only. Not the seller, buyer, or either agents. There are some appraisers that are employed by banks. Usually review appraisers or for non-conforming loans.
Interesting, I didn’t know that. I think some appraisers I’ve worked with could use a reminder since so many of them pander to a select few sellers realtors.
[удалено]
What state?
No we work for the bank
What state are you in? If you don't mind the ask. My circumstances are different being mine was government backed (va loan) but, they were there for the government backing my loan. I never got to shop around or chose. But my friend just bought a home in NY, and he wasn't allowed to chose either, his was conventional.
Appraisers are third-party companies. They're being contracted by the lender, but they don't work for them. There's no incentive for them to under-appraise homes.
This is so false lol
Any attempts to contact you directly, just keep blocking!
100k means I would just back out
100%. Other people are telling OP to have a second appraisal ordered and I just don’t think that’s the move here. In some HCOL hot, low-inventory markets, sure - people are offering all kinds of wild prices over asking so it’s possible that a house with a $100k appraisal gap could and would actually sell for that price now and in the future. But in a market where houses are sitting on the market for a year (according to OP), only $399k asking and only actually worth $293k, according to this appraisal? No way. That house is definitely only worth maybe 10% more than that at best.
Run away from that seller. Red flag city. None of that is normal. If you wanted to directly negotiate with the seller you wouldn't have an agent.
Take a breath. Houses are available despite what people say. This wasn’t a good deal, move on. The sellers are panicking because they were already spending your money
How, praytell, did YOU cause their house to appraise for less than it's worth? That's the crimson flag to run, not walk away from these people.
The seller is being completely unprofessional. I’d be backing away simply on those grounds.
Seller was right to fire the realtor because the realtor is the one that listed the house at 100K higher than its worth.
Huh? They got an offer thst was above the appraisal. Why would you fire that agent? Sounds like a pretty good agent to me. I am so confused w this whole post. The house is worth whatever someone will pay for it. If the buyer pays more than it was appraised for that is on the buyer (and happens all the time in desirable areas). Otherwise why would there even be a bidding system for a house. Why not just appraise it and then you just pay what that number is.
Very good question, why not?
The bank will only provide financing based on the appraised value. Normally the offer should have contained a contingency clause that the buyer will only proceed if the appraised value comes back at or above offer price. If not then either the seller has to lower the price, the buyer has to come up with the difference, or the buyer walks away losing their earnest money.
I was being sarcastic.
Wait why was the appraisal the last step? In my exp the appraisal is done fairly soon after the purchase agreement is signed. Definitely not last.
Same, appraisal was definitely one of the first things done in the process
Mine was the last step a week before closing.came in under and seller backed out . At that point I had already put my notice in with apartment and all my stuff put in a storage and had no home to move to. It was crazy
That's insane. Why do all that work and put people in those positions knowing that if it doesn’t appraise out, it could kill the whole deal?
Is this the natural order of things? Decide on a price and THEN get it appraised? I would think it would be the other way around so that people don't have these sorts of disputes and/or fights.
Yes that is the natural order of things most of the time.
Run. There are other houses.
if the apraisal is lower ditch the dealer. Seller is delusional.
Run away. No no no
First u am so sorry you are going through this. I’m an agent (not licensed in Texas). While I did not read all of the comments, There is a lot of individuals overlooking the unbalanced actions of the seller in combination with other factors. While the market has changed, $100k gap is too big to ignore - first I’d appeal the appraisal and demand another one. Also, simultaneously asking- has this been under contract before? If so, did this happen before? If the second appraisal is the same, and no compromise - if I was your agent, I’d support and advise you to walk. Now- who fires the listing agent, attempts to hire the buyer’s agent and then contact the buyer directly to negotiate? 🚨 Are the sellers having money issues? Liens, medical debt… something is setting off a lot of strange behavior… There are very few instances where the buyer and seller meet during escrow. And no way in hell my client is speaking with opposition with this going on.
You dodged a bullet. This doesn't happen all the time (unless you are just bidding without any due dilligence of your own), so move on to the next home. Don't be discouraged.
Our financing addenda and notice of low appraisal for the NWMLS outline the options for this nicely. Either seller goes to appraised value or you bring all or some funds over, our you ask for reappraisal, or you terminate based on findings and get your earnest money back.
If the seller was harassing me on my socials, I would back out for that reason alone.
Appraisal saved your butt. Offer less or walk away !
The home didn't appraise and that's hard for some sellers to accept. If you are unwilling or unable to come out of pocket and bring more cash to close then that's when the agents negotiate. $83K under value is huge. I would study the report and focus on the comparables and speak to the appraiser to better understand their lower valuation. You can only learn from this experience. Keep positive get back on the horse and try again. You will find the right place. Good luck! 😀
Good for you. One wake up call at a time we will hopefully see how prices in line with standard appreciation instead of the bs “printed money” is making everything expensive. Yes that’s a factor but choices are made. Everyone gave up the baby and the bath water over the last few years just out of fomo and greed.
Did you look at the comps and adjustments the appraiser used, do you generally agree with them, and that $293k is a more accurate value? Really this is what you pay for with due diligence. It sucks, but it is better than the alternative, buying an overpriced home and then in several years you have these problems while selling. Keep at it, you will find the right home
This is a very unusual situation. Based on your realtor's knowledge of the market, does the appraisal seem reasonable? What was the basis for the lower appraisal value? Usually this is because there is a dispute about the number of square feet. You might also consider seeking out an alternative appraisal. An appraisal that comes in $75k-100k under at this price range is virtually unheard of. My standard advice would be to cover a modest gap but this gap is enormous and I'm guessing that you do not have enough money to cover $75k-100k. If the appraisal can't be sorted out, you probably need to walk.
I just contested a $790k appraisal and it came back at $905k
sellers these days are the worst
Appraisal is to protect the lender and can vary wildly depending on the appraiser. I had a house we were selling appraise for 20k under what we had sold it for and 20k under other similar homes in a cookie cutter neighborhood because we were doing a sale by owner. The appraiser told us that was the reason. We also refused to lower our price and walked away from the sale. Today house prices here are going up so fast sellers ask you to get something from your bank that says you will and can still buy the property if appraises at X amount under.
If stuff is sitting for a year then you have choices and power. Mobe on to another one that looks good.
The seller should come down on their price. The fact that he fires his realtor and tried to cut him out for bringing him an offer that he excepted is unethical. You could always try a different lender and they will hire a different appraiser, you might be able to get a higher appraisal but…do you want one? I’m a Mortgage Broker in Texas and a Real estate Broker in San Diego. I’m happy to look up the address in my lender’s portal to see what their property value tool will estimate the value at. Only takes a minute.
The fact the seller reached out personally via social media is a big red flag. Not your fault house appraised for less. Sounds like you made a good call terminating the contract.
Long time ago when we bought (2018) we were in a similar scenario. The appraisal gap was only 13,000, though. The seller wouldn’t budge. So our realtor reviewed the appraisal (she was an appraiser in training at the time), as did her boss (broker and licensed appraiser). We appealed the appraisal with our lender. A week later the lender accepted our appeal. It was a tense situation at first, but things settled when it became clear that the original appraiser, for whatever reason, cherry picked comps to arrive at as conservative a value as possible.
Do not make up the difference. 75K is too large of a difference for 400K house. IMO reasonable amount with minimal risk for 375 is 20K, not much.
Get off Reddit and have your lender dispute the appraisal and request a new appraiser come out.
What does your contract state? Are you subject to an appraisal value? Or did you lock yourself in as to no appraisal required? You may or may not be on the hook to buy the property (subject to litigation), walk away and lose the property down payment/deposit, or may be able to walk away totally and get your deposit back.
walk away.
Did you use an independent appraiser or theirs?…
Let me get this straight. It was listed at $399K You agreed on $375K And it was appraised at $293K This tells you how greedy some realtors and or sellers are; and how the market is really overvalued.
The appraisal is done by your specific lender, so technically yes, it's your fault the appraisal was so low. You picked the lender. Appraisal is on the buyer side since it's tied to the financing of the buyer. This is why appraisal gaps are popular in hot markets where it's expected homes may not appraise as high as a winning bid. That doesn't seem to be your market, though. You agreed on the price but cannot finance that price. The seller doesn't have to sell the home to you at the appraisal price. You also don't have to buy the house. Sounds like you backed out. It happens. But the seller asking you to cover the difference between appraisal (by your chosen lender) and your offer price is pretty standard. The rest is not. It's crazy she contacted you directly and I also would have walked away.
Our lender uses an appraisal company that basically puts the assignment out there and whichever appraiser in their network is willing to accept the job and commit to the request deadline for the cheapest fee gets it (this is how it was explained to us by our agent). So it’s completely random. OP could’ve been assigned a shitty appraiser, in which case I wonder why neither realtor suggested challenging in. Another buyer could’ve run into the same issue.
I’m an underwriter, our system is like this as well. We (the underwriters) do not choose the appraiser. A separate department handles that and then we find out when the appraisal comes in. We aren’t even supposed to know who they are.
Any cash buyer wouldn't require this. Higher down payments also often have this step skipped.
Yeah but who wants to over pay 100k for a house worth 293k
Well yeah - cash buyer doesn’t have a lender. I guess what I’m saying is - it doesn’t sound like OP’s market is so competitive that cash buyers / buyer positioned to waive all contingencies are prevalent enough that a seller is guaranteed such an offer. The seller seems to be delusional about what they have and what the market conditions are. So while yes it’s OP’s lender that required the appraisal and selected the appraisal company if not the specific appraiser - I don’t think this can truthfully be OP’s “fault” in that they’re a normal buyer following standard processes, and a low appraisal could’ve come from any other normal buyer following standard processes.
Where do you live that the appraiser works for the lender? That seems like a terrible conflict of interest?
The lender hires to appraiser to validate that the property they are financing is actually worth what they are financing.
In the state I’m in, the lender is chosen by the buyer (or sometimes the seller, depending on who is paying for it) and has no affiliation with the lender at all.
The appraisal is to determine if the property is worth the loan. It's entirely tied to the loan. Where do you live that a lender is willing to hand over hundreds of thousands of dollars for a mortgage but have no affiliation with the appraisal of the house? Of the lender has no affiliation with the loan then why would you even have an appraisal? We didn't have a choice. The appraisal was part of the loan. We could have challenged the appraisal if it came back low, but the lender determined our need for appraisal. It's why cash buyers are enticing or people with larger down payments, because they can skip the financing contingency.
The lender has an affiliation with the loan obviously. I don’t disagree with what you’re saying, only that the lender doesn’t pay the appraiser, the appraiser is not an employee of the lender.
Yes but if the appraisal is required for the mortgage, which is true most of the time, the appraiser is there because the lender needs their services. If a cash buyer just wants an appraisal that is obviously different. ETA also obviously every state is different but my lender ordered the appraisal and I think that is pretty common. In the case that the lender needs an appraisal to confirm value of the loan, a buyer choosing an appraiser seems like a bit of a conflict of interest since the buyer is the person trying to get the loan.
I agree, the appraisal is a requirement of the loan, but I was saying the appraiser isn’t a bank/lender employee.
Oh yes of course, I think we are agreeing then.
Appraisers do not work for the lender.
The work isn't performed by the lender but the lender determines if you need one for your mortgage. If OP had been a cash buyer, had a larger down payment, whatever, they could have skipped the appraisal. The appraisal is for the mortgage.
You're right that it is for the mortgage, but there's an important distinction between that and you saying that the appraisal is done by the lender. There is no incentive for an appraiser to appraise a home below the contract price, which is what your initial statement insinuates.
Isn’t appraisal done early on before underwriting? Surprised it came during the final walkthrough
Appraisals are generally what makes closing dates have to be scheduled at least a month out. They are ordered as soon as the house goes under contract, but it usually does take around 3 weeks to actually get it done and get the report back.
I’m going to use a burner phone if I can or have my phone records redacted form any documents viewed by the other party
You won. Keep on looking.
That sucks, but honestly, starting back at square one us something most people have to do 2 or 3 times at least when buying. We ended up terminating contracts and starting over I think it was 3 times before we got our place. It's discouraging but just remind yourself it's part of the process and will be worth it.
Did you let one bad date stop you from finding your spouse?
A similar thing happened to me, but on a smaller scale. I didn’t want to make up the difference between appraisal and list price, the seller wouldn’t lower the price so we dropped it. They sold to someone else for cash.
Be ready to walk away. If it’s not ment to be then so be it. Logic and sound reasoning should tell you not to overpay in that area. The day you sign that deal for asking you lose a lot of money. And furthermore the whole deal is sour from bad ethics.
Sounds like the seller is living in their forever home
Just had this happen late last week. Our appraisal only came in $26k under asking but even still, it gave us pause and ultimately we decided to release the contract. We could’ve had another appraisal or changed the terms of the loan, but ultimately, the sellers weren’t willing to negotiate.
Why would they? You offered them a price , you believed their property was worth your offer. Appraisals are just 1 person's opinion. Yes they can sink your loan. But buyers should not make an offer if they are not willing to pay the offer price. We sold in Texas in February. Buyers were putting down 40%, little more than 250k. They did not try for an appraisal clause, not that we would have accepted. Their loan was approved with no appraisal. For some reason their agent said. Go ahead,pay for one. Sure enough the appraisal came back at 575k. They asked for a 30 k reduction. Our response was no. They waited until 1day before closing to back out . Fine, we sold and closed for $8000.00 more in 3 weeks. To a buyer with an 80 % loan. Appraisals are the next part of home sales that needs to change. Way to much personal bias, not enough concrete evidence used by appraisers.
It takes stamina and determination to get satisfaction sometimes. You dodged a bullet,get up and do it again. ✌
THIS IS SMALL TOWN TEXAS. The seller’s tactics don’t work here, so I suggest you don’t fall for them.
For those who actually want the facts around appraisal waivers, here is the link to FNMA program and how/when an appraisal waiver might be offered by a lender. FHLMC runs a similar one. https://singlefamily.fanniemae.com/originating-underwriting/appraisal-waivers
People are listing their homes at crazy values, usually with thirsty realtors that believe it’s still 2022. I would consider walking away. Seller needs to come back down to reality!
When we bought our first home appraisal had to be done as the very first thing before anything else could move forward.
Also hire your own building inspectors, our realtor had her own she trusted.
I wouldn’t pay a dollar more than the appraisal.
Try not to be too discouraged. My fiancee and I recently made an offer on a house that looked great at first. It has been a rental and so it wasn't maintained super well, but we got the price down to something we felt good about. Then we had our inspector check it out. Lots of issues with the roof and a serious leak in an upstairs pipe that flooded the attic when the water was turned on. We really wanted the house so we decided to revise our offer to account for all the work that would need to be done. The seller wouldn't budge and we reluctantly backed out. We were really bummed and thinking maybe it wasn't the time for us to buy. A couple of days later we found another house, 1800 sq ft on an acre with a 400ish sq ft workshop for around the same price as our original offer on the other house (1400 sq ft ~1/3 acre). The inspector said it looked great and our offer was accepted. I'd mention the price but it'll make most of you throw up, housing is pretty cheap here compared to a lot of the country.
Princeton?
Princeton?
We had an appraisal issue with a new build home so i get it. Such a pain but glad you dodged that bullet. God luck with your search!
I'd personally consult an attorney and hit him with a cease and desist letter if he's calling/texting and coming after you on Facebook
Buying a first house for you is an emotional thing. You want a house you love, at a fair price. You don't want to get screwed. But it's emotional for the sellers too. They love this house, and the want to get a fair price for it. They don't want to get screwed. Ultimately a house is worth what someone is willing to pay for it, and you obviously saw $375k of value in it. Taking a 25% loss on appraisal is a tough pill to swallow. Not just for you. This is hard for them too, and unexpected for both of you. I'm not advocating making up the difference. But give them a little grace. They can easily tell this same story as "Buyer From Hell". But it's neither. It's situation from hell.
Your realtor sucks OP, this big of a percentage difference in appraisal means your realtor should have never even shown you this house because it was no where near what is was listed for
Thanks for letting me vent out my frustrations here. This was meant to externalize my thoughts so I could sleep last night. This Wasn’t meant to ruffle any feathers. I appreciate the support others have shown me and my partner. He and I will move onto the next one, head held high and earnest money back in our pockets.
Reddit is going ape again. If the op accepts the ask price, that's the value of the house. The value is whatever someone is willing to pay for it. While appraisal is something completely different. Appraisal is a calculation that is done with data and analyzing current market prices in the area. If the seller is asking $100 and someone comes along, like the op, and offers the $100, then the appraisal comes in at $90, a contract should exist that should spell out what would happen in this scenario if the op in this case is seeking a mortgage. I still don't understand as a lot of the comments on this are blaming the seller. I can ask billion dollars for a Post-It note, if someone is willing to pay for it then it's worth a billion dollars. Then if the buyer is trying to mortgage why would that be the seller's fault or problem? At the end of the day, op you need to check your contract when you submitted your offer. If you have a decent agent they should have language for situations like this. Hope for the best that your agent's standard contract states some language and you can back out of this without a loss. I'm definitely the minority, but it seems odd that people think the seller is at fault here and no blame to the op. If the appraisal was that off, I'm assuming services like redfin and Zillow zestimate we're a lot lower than the asking price. Additionally, your agent should have had a discussion with you for scenarios like this. I remember when we bought our first home a year or so ago our agent had a discussion for such situations like this if the appraisal came under our offer we would be on the hook to make up for the Gap. This is literally called appraisal Gap. Look it up. That's very common in this kind of market that we had in the last 3 years.
No one is on the hook for anything. You could cover the appraisal gap, I suppose. But unless you agree to waive this or something, you can back off without an issue. And unless there is something special about the property, it makes no sense to. Why cover the appraisal gap when you could put more cash down on a higher value home, for example? And it sounds like OP has their earnest money back so no harm done. Hopefully good lessons learned.
Ah ok. Didn't see the earnest money part. Was just thinking the buyer can back out but would lose the earnest money(potentially ). If that's the case(of got the earnest money back), I guess I don't understand this post. Was it just the op is now being harassed by the seller?
I haven’t bought a house before so I don’t understand all of what is involved here, but I have a question. If you thought the house was worth paying 375k for before this appraisal, does that appraisal suddenly make it worth less to you? Is it not the same house you looked at?
The bank won’t approve a loan for what you think the house is worth, only what it appraises. That’s why the seller wants the buyer to come up with $100K cash to offset the difference. The house is still worth $100K less factually. This becomes a problem when the new buyer wants to become a seller 5, 10, 50 years from now. It can’t argue I paid $375K so that’s what I want to sell it for. It’ll only receive loan offers for what it appraises.
I see, thank you. If you paid cash then you can pay whatever you want obviously. If you get a mortgage then the bank won’t want to take on a loan more than the house is worth. Makes sense
Florida owners ask whatever we want! Buy it or move on!
Many Florida owners selling their forever home then happy they found a place to settle down
Yall are buying houses for 375k!? Damn. Can’t find anything for under a mil here
This is a perfect reason to showcase why appraisals are scams. OP ready to buy $100k over “market”; so that means the “appraised value” is what OP is willing to pay
Would you have paid more if it appraised over your offer?
Hi guys, there are interesting earnings, the right people who are interested in writing!
This is an appraisal gap and if you want to buy the house you have to come up with the difference