bank appraisal as leverage on price?

You can tell the seller that the man in the moon said your house in only worth 'X' $$. If he doesn't want to sell to you for a lower price, then he won't. But if he's in a rush to sell, then maybe it could work.

Posted by: Anonymous at January 26, 2007 9:40 AM

Basically, you get no leverage with the seller due to a low appraisal.

I work as an appraiser and can tell you that it is very important to review the actual report. Unfortunately there a lot of lousy apprasiers out there - peolple who sometimes don't do their homework and screw you over with a low value. Check the comps used, and make sure there is nothing that stands out to you that doesn't seem right. Who is your lender? Is your contract contingent on financing?

I speak from experience on this - two yerars ago, when purchasing our house in Brooklyn, the appraisal came in $60K less than the contract price. It turns that the appraiser did the absolute minimum - he made up the square footage, drew a totally ficticious floorplan and used comps too far from the subject property. After a long and painful process, I was able to challenge it with more accurate info and better comps. I eventually won, and learned that there too many lousy appraisers out there as a result of the lending/housing boom of the last few years.

Good Luck!!

Posted by: Anonymous at January 26, 2007 9:59 AM

I had a very low apprasal on the house we just bought. I wasnt borrowing 100% anyway so it didnt really matter to me (no intention of selling in the next 30 years or so).

The guy seemed like an idiot based on his comments. He said that the area had recently had mild price appreciation in the past few years(hello...where is this guy living?). Then he comp'd my house using 3 others in the area - all three sold for more than we were paying and one of the houses had an entire floor less.

The whole thing was a joke but since it didnt make a difference, we just let it go.

Posted by: Anonymous at January 26, 2007 10:58 AM

I also had a strange appraisal experience...

We got an appraisal that was $100k short of the agreed-upon price (we had previously had the property appraised by an outside appraiser and it came in ABOVE the purchase price).

The bank mortgage officer must have had a word with his appraiser and sent out the same appraiser for a "re-certification" of the appraisal (personally, I have a feeling a well placed "tip" helped ensure the proper number appeared on the appraisal).

The guy was in and out of the house in less than 30 minutes and the number came in **exactly** on the money.

Generally, the appraisal price isn't a good negotiating tool, unless the seller is desperate to get it off their hands.

If your contract is contingent on financing, then you may be able to get out of buying the place, but that doesn't mean the seller has to sell to you... if they had other bids, the can also go back to one of the other bidders and offer it once they're out of contract with you.

I'd ask your lender/mortgage broker about having a re-certification of the appraisal done, or a even a new appraisal altogether. A new appraisal may cost you a few hundred dollars, but compared to the price of the house, it's peanuts (besides, by the time you get to closing, you will be writing checks and you won't know what it's all for).

Also, ask the real estate agent for comps (they want the sale to go through, after all) and I'm sure they will find the highest priced comperable-sized homes they can.

Posted by: Anonymous at January 26, 2007 12:23 PM

To OP: Not in this market, not in this city.

Posted by: Anonymous at January 26, 2007 2:35 PM

low appraisal worked in my favour..but honestly i think it was more timing than anything else..I have a friend who while in the process of selling her house ran into the low appraisal issue..she refused to drop her price..the buyer walked away.. the next buyer's appraisal had different results and she sold her house at the price she wanted.

i would look at the appraisal very closely and even then its still a risk...

Posted by: Anonymous at January 26, 2007 3:40 PM

It does happen, it did to us, and we did successfully use it as a bargaining tool. Our place was appraised for $29k less than our offer, which was the ask price. The seller insisted her house was worth the ask and we agreed wholeheartedly, but told her that unfortunately the bank didn't. In the end, she came down $24k and we chipped in an extra $5k in cash to make up the difference. By the way, we also had a similar experience to 12.23 above. Our first appraisal of this same property came in $54k short. After I had a word with the mortgage broker and told him what might be an acceptable appraisal, the second appraisal came in only $29k short as described above...from there we negotiated with the seller.

Posted by: Anonymous at January 26, 2007 5:04 PM

You don't need to be there for the appraisal. However, you should DEFINITELY be there for the inspection.

Posted by: Anonymous at January 28, 2007 3:58 PM

Be there for the inspection definitely... if the seller is there, they may try to explain away problems - don't let them pressure you. Take as long as you need. Be VERY thorough. We almost bought a house with major structural problems, which the inspector found... the seller tried to tell us that she just wanted to sell it "as is" without acknowledging the underlying problem.

For the appraisal, it depends on the appraiser, but my suggestion is if you do go, keep quiet and just watch. Definitely don't go and poke around while they're doing their thing or "admire" the house.

We had to go through several rounds of appriasals - I went to one of them and the appraiser definitely resented my presence - you don't want them to feel like you're stepping on their toes.

If you do go, keep very, very quiet and just observe. If the appraiser doesn't like you there, he doesn't have much accountability and can decide on a whim the property isn't as nice as you obviously think it is.

Posted by: Anonymous at January 29, 2007 3:23 PM