Posted by Julie/MI on 7/10/13 6:49am
Msg #476175

OT Appraisal came in $60k below offer, options?

Hoping there are some real estate agents out there that can tell me if I'm nuts or not.

We put in an offer to purchase for $195 and the fha appraisal came in at $136K. To me that's HUGE on such a low priced home.

The banker said they are working to get the appraiser comps that are higher, but we've been looking in the neighborhood since Jan. and we know the comps are fine. We are even shocked at how low it came in but we told our real estate agent and lender NOT to do us any favors by trying to tweek up the appraisal by $60,000. Our agent is not responsive to tell us and I bet the sellers are in a real pickle.

So is it normal to try to crank up an appraisal that much??????

Reply by ReneeK_MI on 7/10/13 8:16am
Msg #476177

I don't know a whole bunch, but I do know this situation can happen if there's anything unique about the property giving it value that hinders finding relative comps. Historic homes, log homes, etc. Barring that - you're probably seeing what I'm seeing, values are INCREASING, which throws up an even bigger red flag on this.

Reply by Darlin_AL on 7/10/13 9:24am
Msg #476182

OK, if I understand the situation--you want to buy property & offered $195. With the lower appraisal you can lower your offer to match what a lender would finance for you. Why would you want to pay more than the current value?? You can apply for a loan revolving around the appraised value & then put in your own $60k if you want to feel nice? Appraisals are pretty-much un-changeable once they publish their findings. Sure, sellers are maybe in a pickle, but in this market you may be doing the sellers a favor by helping them get out from under the mtg. pmts. The agent holds a dual agency, to the seller and the buyer. If the agent is honest, that person has to stay out of trying to alter appraisal value or sell you on paying more, or them on accepting less. It is strictly your decisions. Of course the agent does not engage in revealing the sellers' financial woes, or whatever, PRIVACY issues. (Once again, if agent is honest.)

Reply by JPH13/MO on 7/10/13 9:24am
Msg #476183

Hmm. It definitely didn't used to be normal to "crank up an appraisal that much." I haven't been an appraiser for over 8 years, but I doubt things have changed all that much.

It would totally depend upon the comps that were used and how they differed from the subject property. Were pre-foreclosure, bank-owned or rental properties used as comps? You can't adjust enough for all the damage that can be inside and outside of a property that was basically abandoned by the owner, OR one that was rented and trashed by the tenants, so if the comps used fit into those categories you could easily need to add $60,000 even though an appraiser is not allow to adjust that much for the difference in condition.

Other possibilities are that the property you are buying is unique in some way that makes it more desirable compared to the comps used, but you didn't mention that, or the sellers of the properties used as comps needed a fast sale and were willing to take much less than they could have if they waited for a better offer.

You should let them look for better comps just in case any of the above ends up being the case, but I'm guessing they still won't be able to up the value by $60,000. Perhaps if they can get it up to a more reasonable value the sellers would be willing to sell for less (?)

Reply by MW/VA on 7/10/13 10:05am
Msg #476186

In general appraisals are coming in very low. Try to

remember that there's a huge question mark on values in general these days. Add to the mix foreclosures & shortsales, and "market value" has been greatly impacted. The appraisers are in a CIA position, since many were called into court as accomplices in appraising homes for what the lenders wanted the value to be. It sounds like you might make out on this one. The seller may be forced into a short sale because of the low appraisal. I've seen that happen a lot in my area. Unfortunately, I think it's all rotten, rotten, rotten. The housing market has been so manipulated it has ruined the chance of home ownership for many people.

Reply by Stephanie Santiago on 7/10/13 12:08pm
Msg #476195

Excellent points, Marilynn. n/m

Reply by ME/NJ on 7/10/13 12:43pm
Msg #476203

60K on 195 will never happen in this soft market, if you said 10-15K you may have a shot. If you want to know in general what a home is worth go to Zillow.com they are in the ballpark.

Reply by HSH/WA on 7/10/13 12:59pm
Msg #476205

Re: Been a broker for 30+ years and Darlin is right

on this one. You say the comps are right, why in the world would you want to over pay that much? I would think getting the price to match the appraisal is the way to go - not the other way around.

Reply by Susan Fischer on 7/10/13 9:41pm
Msg #476278

I wouldn't go by Zillow - it says sq ft of this house is

1800.

It's 2900.

Don't know what that means, but it's wrong. Not sure I'd trust its estimate of this home's worth if they can't even count its feet.

Reply by Marazz/AZ on 7/10/13 1:39pm
Msg #476211

I am a little confused; if you think the comps were the correct comps (similar in size, location and sold recently) do you now think $195K is too much to pay? The appraiser may have done you a favor.

About the only thing you can do to "fight" a low appraisal is provide better comps if you can make a case that the appraiser used inappropriate sales. Most markets are no longer REO or short sale driven, so using those types of sales when typical market sales are present would be a big oops on the appraisers' part.

Giving an appraiser "higher" sales is only going to piss them off. Leave values out of it, inquire why comps X, Y, Z were not used, state why you feel they were more appropriate (date, location, style etc) and see what the appraiser has to say. May be very good reasons why those were not used. Or, you may find out the appraiser is a moron.

The other tough thing right now is that appraisals must use historical data (closed sales). You can't really make legitimate adjustments to capture what's going on in an over exuberant bidding war. And that's not the definition of market value anyway, lenders want to know the most "probable" selling price not the highest possible price. That said, I've seen lazy appraisers cloning reports from 6 months ago and not even putting new sales in. So sales should be closed, but the most recent in the 'hood.

It's tough to buy right now but IMHO this is another artificial bubble due to institutional investors buying up inventory. Won't last.

If you think long term, it's better to buy when rates are higher and values lower (every 1% increase in interest rates eliminates 10% of possible buyers at any price point, hence, values will drop). In a few years when things settle down you can refi, but if you buy when prices are high you're stuck with that much principal.

Reply by Tim Cameron on 7/10/13 1:53pm
Msg #476215

Real Estate Agent for 30+ yrs also.........make the price come back to the appraisal or don't buy......Marazz is right, we have a market bubble that will burst again.....I will only sell a home to a long term buyer....a person has two options to choose from right now....save thousands of dollars in interest but weather another drop in RE prices before a major bounce....or sit on the sidelines, wait for the correction and buy at higher interest rates and lower prices, thats better for the shorter outlook buyer......one thing is for sure...if you are a seller, waiting is playing with fire and there is no option that is good for you in the near term except take advantage of this market today........

Reply by Philip Johnson on 7/10/13 3:25pm
Msg #476230

You'll only sell to a long term buyer?

Don't know where your are in the evergray state, but here in our corner where things still stink, most RE agents sell anything to anyone.

I have bought and flipped 4 houses in the last 12 months, would you have turned away 8 transactions @ 5% each?

Reply by Julie/MI on 7/10/13 8:04pm
Msg #476271

Re: You'll only sell to a long term buyer?

sorry for my fragment thoughts.

No I don't want to overpay and the appraiser did me a favor.

When I typed my post this morning, the seller was trying to give comps to the original appraiser to try to raise it to meet their sales price. I said don't do me any favors and my question to those in the business, was can an appraisal really increase by that much.

We cancelled the deal and my money is being refunded....now I'll be homeless with 4 kids in 2 weeks. 3 offers have had issues.

I really don't think the housing market is as strong as the reports say. When I went to find some apartments today, they property managers said many have sold and appraisals are coming in low.

Renee your county has held values better than mine Macomb is still a depressed market now that I've been looking for homes since Jan.

Reply by Tim Cameron on 7/10/13 9:05pm
Msg #476276

Re: You'll only sell to a long term buyer?

I will only sell to long term buyers that are retail purchasers.....I have investors and remodel contractors that are still tap dancing on land mines...the Western Wa market is white hot...just exactly like it was in 2006 and early 2007 and we all know what followed.....the feeding frenzy created by free money will end and it is always when everyone is a bull that the bears take over.....

Reply by Susan Fischer on 7/10/13 11:29pm
Msg #476288

Out of left field, is there some kind of adjustment in the

analysis you and Tim put forth for the old adage: Location, Location, Location?

(Personal rant: The appraisal Industry has been in cahoots from the jump - and I say this unabashedly because the sum of the stories we NSAs alone regarding the "Appraisal" Industry would fill rooms. With its magical abra cadabra, "appraisal" exactly matches offer/acceptance/loan approval...)