Thursday , 27 November 2014
REEW Launches New Site! - Latest Articles:
Home » Beyond Today's News » Five Ways to Fight a Low Appraisal
What do you do when the appraisal on the dream home you want to buy comes in below the price in the offer the buyer has accepted... even as much as 10 to 20 percent below?

Five Ways to Fight a Low Appraisal

Buy the Ultimate Guide Here

The Ultimate Guide to Fighting Low Appraisals

Nearly half the home buyers in America experience something like this:

You’ve saved for a down payment and worked hard to get approved for a mortgage. After months of looking, you found a great house that meets your needs and fits your budget. Your offer has been accepted. You spent money on inspections, a title search, a survey and other closing costs. As the closing date nears, you gave notice where you live and put down a deposit on a moving company.

Then you receive a letter from your lender. Your dream home has appraised five percent lower than you anticipated based upon the price you had agreed upon with the seller. The lender is unwilling to increase the amount of your loan.

The clock is ticking toward closing. If you don’t come up the difference in time, the house is gone. You’re out of pocket for your costs to date and you have to start your search over. It may take months or longer to find a deal

Sound familiar?
Whether you’re a buyer or seller, now you can fight back when a low appraisal threatens to cost you serioious money, or to lose the house of your dreams.

Buy the Ultimate Guide Here

 

What do you do when the appraisal on the dream home you want to buy comes in below the price in the offer the buyer has accepted… even as much as 10 to 20 percent below?

Chances are that raising the cash for your down payment and closing cost has tapped you out. Finding thousands more to make up the difference between the appraised value and the contracted amount is out of the question.

You’re not the only buyer who has hit the low appraisal snag. This past June and July, 16 percent of real estate pros reported a cancelation in a sale, mostly due to a large number of low appraisals.

However, you don’t have to walk away. In fact, some real estate professionals and economists say that low-ball appraisals are pushing values down home values and undermining the housing recovery.

You can fight back. You have options and chances are you can find a way to make the deal work without increasing your down payment.

Appraisals are largely based on prices recently paid for comparable local properties. Over the past decade, finding “comps” that accurately reflect values has been a challenge as values rose quickly during the boom and fell just as fast during the bust Discounts paid for foreclosures and short sales have created a dual price structure between “normal” and distress sales. .

Finally, when pricing offers today many buyers rely popular online valuation tools, called AVMs or automated valuation models, instead of a comparable market analysis from a real estate professional. AVMs give fast property value estimates but they often differ greatly from appraised values because they are determined by algorithms using available local price data, not actual inspections of the property. During this time of record low home values, it’s no wonder that more and more appraisals are coming in below prices that buyers and sellers have agreed on.

It may seem ironic that buyers would want the homes they want to buy to appraise for as much or more than they are willing to pay. Remember, the purpose of the appraisal is not to help you get a better price, but to protect your lender should, heaven forbid, you default. The lender wants assurance that your home will be worth enough to recoup their investment.

Even if you have a great job, sterling credit, an adequate down payment and money in the bank, you lender will still want a conservative appraisal. In light of losses they have taken on the millions of foreclosures in recent years and the tough times many banks have had on Wall Street, lenders are taking no chances these days. They are more interested in protecting themselves from a loss than they are in making you a loan.

Here are five steps you can take to save your dream home.

1. Get the seller to lower the price. By far, this is the easiest solution, especially if your appraisal comes in less than 10 percent of the contract price. Obviously, a lower price is a great idea for the buyer, but why would a seller go along? In July, 2011 the average home in America took about 88 days to sell. Demand is soft and time is money. Your seller, particularly if they are selling to buy another home, could be in a real bind if you are forced to back out and they have to put the house on the market again. After all, there is no guarantee that if you walk away, the seller won’t receive a low or even lower appraisal from the next buyer’s lender. Today, many buyers are offering incentives to sellers, such as payment of some or all closing costs. Lowering the price might be a cheaper option for the seller in order to get the deal done on time. Sometimes a bird in the hand is best.

2. Ask the seller to offer to carry a second mortgage for the difference. This solution doesn’t cost the seller anything but the buyer incurs greater debt. If the buyer really wants the home but cannot come up with the difference in cash, making payments or a lump sum payment at a later date to the seller is an option. After the escrow closes, sellers often retain the right to discount the second mortgage, sell it for less than face value to an investor.

3. Do your research and dispute the appraisal. Is the contract sales price a fair assessment of the property value based on a well-prepared comparable market analysis (CMA) from your real estate agent as opposed to an online AVM? Was the appraisal done by an appraisal management company that may have used a less than expert or out-of-town appraiser?

Disputing the appraisal may sound a little aggressive but you might be the victim of a poorly prepared appraisal. Do some research first and go to war if you have the ammunition.

You have the right to get a copy of the appraisal from your lender and to find out who did it. What is the appraiser’s reputation? Have any complaints been filed with your state appraisal licensing agency? Where is the appraiser based? Did they perform an appraisal in a housing market that they may not know well? Did the appraiser have adequate information about the subject property. If your appraisal was conducted by an out-of-town appraiser unfamiliar with your market, you have every right to demand an new appraisal.

What comparables did they use? Ask your agent and the seller’s agent to put together a list of recent comparable sales that justify the agreed-to sales price. Submit that list to the underwriter and ask for a review of the appraisal. Also, ask the agents to call the listing agents of pending sales to try to find out the actual sales price of those properties. Listing agents do not have to disclose the sales price, but many are happy to help out because they could find themselves in the same situation. Pending sales are more current and are not closed, so the original appraiser would not have access to them.

The key to a successful dispute is data. You will need as much data you can get to back up your dispute.

4. Ask the lender for a new appraisal. Should you find that you have a good case that the appraisal wasn’t fair or accurate, ask your lender for a new appraisal, which you may be charged for.

Another strategy is to get two additional, unbiased appraisals and use the average of all three to arrive at a fair price. This is a risky strategy, in light of the fact that another appraisal might not come in higher than your first; it might even be lower if values have fallen.

Depending on how convincing your argument is, your lender has the ability to override the appraisal estimate, which is unlikely, or to order a new appraisal, which is more likely. If a new appraisal is ordered, talk with your agent about somehow splitting the cost with the seller. Perhaps the listing agent and selling agent will split the fee so the buyer does not have to incur additional costs associated with the transaction. Appraisals cost around $400 or so.

5. Get your own, independent appraisal. If you order your own appraisal and your loan is an FHA loan, ask the lender for a list of approved appraisers. Usually the bank will review your appraisal and ask the previous appraiser if they agree or disagree with the newly submitted one.

If the first appraiser disputes your appraisal, the bank may request a third appraisal done by another appraiser, or they may just reject your appraisal.

However, if the first appraiser agrees with the disputes you present, they may adjust their original appraisal and you may get a better price.

If these tactics fail and you cannot make up the shortfall in the appraised value, you may find yourself moving on. If so, be sure that you were protected by a contingency clause in the sales contract, stating that the transaction can be terminated if the home doesn’t appraise at, or above, the sales price.

37 comments

  1. What do you do if you believe the appraisal is serioulsy in error. For examp[le the “comparables” simply aren’t valid comparisons or the appraiser made obvious errors? We’ve already complained but the appraiser seems to a a paper mill more concerned about pumping out reports than checking their accuracy. Isn’t here a prefessional board for independent appeals?

  2. Alan:

    Yes. Every state certifies appraisers. Contact yours and file a complaint. If the appraiser is a Realtor you can also contact NAR. You can also register complaints on consumer sites like Yelp! To solve your problem, though, the best strategy is to get youtr own appraisal done by the most reputable local appraiser you can find.

  3. Go over the appraisal with a fine toothed comb. I struck gold when I saw that the person who ran through my home in literally 5 minutes was NOT the person who signed the appraisal. ILLEGAL

  4. Thanks for your submission. I would like to comment that the very first thing you will need to perform is determine whether you really need repairing credit. To do that you simply must get your hands on a duplicate of your credit report. That should really not be difficult, because government makes it necessary that you are allowed to have one free of charge copy of the credit report on a yearly basis. You just have to consult the right people. You can either browse the website owned by the Federal Trade Commission or maybe contact one of the main credit agencies immediately.

  5. I’ve learned some new things out of your blog post. One other thing I have found is that normally, FSBO sellers will probably reject anyone. Remember, they would prefer not to use your providers. But if an individual maintain a gentle, professional partnership, offering assistance and staying in contact for about four to five weeks, you will usually be capable to win a discussion. From there, a house listing follows. Thank you

  6. Just wish to say your article is as surprising.
    The clearness on your publish is simply cool and i coild think you are a professional
    in this subject. Well with your permission allow me to seize your
    feed to stay up to date with imminent post. Thank you
    a miklion and please carry on the gratifying work.

    My website :: rental luxury homes MN

  7. That is a really good tip especially to those fresh to the blogosphere.
    Brief but very precise info… Many thanks for sharing this one.
    A must read article!

  8. Excellent tutorial to defend low appraisal. Can we do our own appraisal by local reputed appraiser?

  9. Thank you for sharing useful tips. These tips have given options to buyers to fight against the low appraisal and to make the deal without increasing down payment.

  10. Great options but I’d settle for option 3– dispute the appraisal. For this, I should have a really good agent of influence and information.

  1. Pingback: Five Ways to Fight a Low Appraisal | RealEstateEconomyWatch.com | Real Estate Success Track | Scoop.it

  2. Pingback: What to do with a low appraisal | Loan Officer Syndicate

  3. Pingback: What to do with a low appraisal |

  4. Pingback: What to do with a low appraisal | Jackie Murphy

  5. Pingback: Housing-Today. com

  6. Pingback: What to do with a low appraisal | Ian C. Williams

  7. Pingback: What to do with a low appraisal | Lisa Kepler | The Legacy Group | Seattle

  8. Pingback: What to do with a low appraisal | Jolene Messmer - Cobalt Mortgage

  9. Pingback: What to do with a low appraisal | Rick Susnjara - Cobalt Mortgage

  10. Pingback: What to do with a low appraisal | Eileen Burke - Cobalt Mortgage

  11. Pingback: What to do with a low appraisal | Mark Meath - Cobalt Mortgage

  12. Pingback: What to do with a low appraisal | Ian Myers - Cobalt Mortgage

  13. Pingback: What to do with a low appraisal | Tina Ryan

  14. Pingback: What to do with a low appraisal | Kristine Moreland - Cobalt Mortgage

  15. Pingback: What to do with a low appraisal | Dana Peterson

  16. Pingback: What to do with a low appraisal | Bob Richey - Cobalt Mortgage

  17. Pingback: What to do with a low appraisal | Melinda Weber- Cobalt Mortgage

  18. Pingback: What to do with a low appraisal | Dave Moody - Cobalt Mortgage

  19. Pingback: What to do with a low appraisal | Jeff Bell - Cobalt Mortagge

  20. Pingback: What to do with a low appraisal | Hank Stecker - Cobalt Mortgage

  21. Pingback: What to do with a low appraisal | Brad Evered - Cobalt Mortgage

  22. Pingback: What to do with a low appraisal | Leigh Spearin - Cobalt Mortgage

  23. Pingback: What to do with a low appraisal | Jeff McGinnis Real Estate

  24. Pingback: What’s the best way to handle a low appraisal? « teamrealtynw

  25. Pingback: What to do with a low appraisal | Loan Officer Syndicate 2

  26. Pingback: What to do with a low appraisal | Lisa Pearce

  27. Pingback: google

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>