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May 13, 2009
Low Appraisal: Any Recourse?
We're selling our 2BR co-op, had a deal fall through in January, and now have a new buyer whose bank just appraised our property. The appraisal came in $25K less than the sale price -- we were pretty shocked! This appraisal puts the value of our apartment at $40K less than the agreed-upon sale price for our first, now-defunct deal. At that time, the appraisal wasn't a problem, but the buyer getting PMI was. Do we have any recourse in this situation? Can we protest the appraisal? We got a copy, reviewed it today, and the comps seems legit, but the square footage is less then we measured in the past (not sure how it compares to the square footage recorded in the first appraisal). Has anyone had any experience with this? Thanks!
Comments
if you have a broker, you should have them call the buyer's lawyer and see if they can get another appraiser. something has to give to get the deal done.
btw, the appraisal industry is a downright scam. believe it.
someone can be coached to appraise it higher. i did. you need to go out do your research, find some better comps than what they used and convince them to use it.
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Posted by: forever at May 12, 2009 11:18 PM
Yes try lowering your asking price. In case you didn't hear we were in a housing bubble caused by real estate brokers and flippers. Please tell us when you purchased your home and at what price.
Posted by: hannible at May 13, 2009 6:04 AM
yOu could request and pay for a second appraisal.....
Posted by: PHfamily at May 13, 2009 9:39 AM
This is because of the new HVCC guidelines. I already posted that this would be a problem.
If you are going thrugh a broker than he/she needs to send the loan to another bank and pay another appraisal fee.
If you are going directly to a retail bank you are SOL and you need to go to another retail bank and order a new appraisal.
Posted by: Adam Dahill at May 13, 2009 9:55 AM
Where does it leave your deal? Does your contract ahve a mortgage contingency and, if so, would the clause be triggered by the appraisal? If you haven't already, you should discuss the implications with your lawyer. If a the buyer's failure to close here would result in a buyer default, buyer will have a lot of pressure to find a way to make this work. If the appraisal will allow the buyer to walk away with the deposit, then you may need to explore options to make it work. Following the WAMU/e-appraisit debacle and given the current climate, I imagine appraisers are not easily jawboned, and you would need demonstrably more valid higher comps or proof of clear errors to do it. Check the specs -- did they short you a bathroom, fail to credit central air or a wbfp, etc. Also, talk to the realtor about getting better comps. realtor will want to try to hold the deal together and should be helpful here.
Posted by: slopefarm at May 13, 2009 9:57 AM
This happened to us in August - we were FSBO and the appraisal came in 80K lower than contract price. I have since learned that brokers often smooth this over with appraisers (not legal or ethical, but maybe one advantage to using a broker that never occurred to me). Anyway, after a stressful 5 days we were able to negotiate with our buyers - they got an extra 7K off the contract price in order to qualify for the mortgage and deal was done. In our case, the appraiser was from upstate (was a small upstate bank - incidentally the President of the bank was the buyer's dad!) and the appraisal report was horrible. We were on President St. btw. 6th and 7th Aves. and the comps were from Windsor Terrace and Gowanus. We had a private 500 sq. foot legal and landscaped roof deck, none of the comps had outdoor space, etc., etc. We considered paying for another appraisal but in the end it was easier to just negotiate the contract price a little and be done with it, as the economic situation was worsening by the minute in late August and I just wanted close ASAP. Good luck!
Posted by: WTbound at May 13, 2009 10:00 AM
One other option if both parties are in agreement. Happened to me years ago. Appraiser had never worked in Brooklyn Heights and comps were in different neighborhoods.
If both parties still want to go forward, nothing stops you from selling "furniture" to the buyer at an agreed to price. Lawyers whip up contract and it's signed after the bank lawyers leave the closing. Happens. If appraiser says $25k, then offer to sell furniture for $20k for example.
You're assuming a little extra risk, and buyer has issues too - non-deductibility of that portion of their payments, and a compressed payment schedule. So deal may still not work, but you're not necessarily SOL as other poster has said.
Posted by: Johnny at May 13, 2009 10:03 AM
No recourse. Accept the appraisal now or less later. Welcome to the crash. Real talk.
***Bid half off peak comps***
Posted by: Brownstones Half Off at May 13, 2009 10:13 AM
that happens quite often in down markets. your broker should negotiate with the bank and its appraiser, in the end you will probably have to give something up on the price even if it is not the full amount. waiting another month or two may mean even lower appraisals. We
are in a bad down market right now and i do not think things will turn around this year.
Posted by: mcKenzie at May 13, 2009 10:15 AM
This happened to me in an up market (2003)... I was trying to buy a tiny studio in Murray Hill, and there were no comps nearby (because of the size). The seller even lowered the price by something like 25K (the place was about 150K), and my bank still said "no". I had already [barely] passed the Board interview, too. I was pissed at the time (lawyer fees & huge waste of time), but I was told I would not be able to get a good appraisal (but, I was only putting 10% down).
Posted by: broadwayron at May 13, 2009 10:26 AM
Is it a large co-op building or a small one? Large buildings have better comps. YOu should be bale to work something out.
Small buildings, with 2 to 5 units, especially walk-ups, are getting hammered right now. Not much to do there.
banks are also shying away from buildings with a large percentage of unsold (ie: rent-regulated) units.
Posted by: mcKenzie at May 13, 2009 11:18 AM
No Offense to anyone above but you are not going to be able to negotiate with either the appraiser or the bank today.
I suggest you read up on the HVCC guidelines that went into affect May 1st. It prohibits any broker or retail loan officer from ordering an appraisal directly and or having any contact with said appraiser prior to the completion of the appraisal report.
You are allowed to send them a contract of sale but on refinances you are not allowed to tell them the estimated value.
This is a big issue and you are only going to hear more of it in the upcoming months.
Posted by: Adam Dahill at May 13, 2009 11:29 AM
can you lower the amount of the bank loan and give them a second loan to pay you back directly? Talk with your lawyer. The chances that they will reappraise are very small.
Posted by: smeyer418 at May 13, 2009 11:44 AM
Not sure about finagling a higher appraisal, but you could try above suggestions esp. getting the broker involved.
If for example, your sale price is $225k and the appraisal is $200, and the buyer's bank is willing to lend 80% of the appraised value or 160k, then I'd think the options are
- if the buyer wants the deal to happen they can put up 65k instead of the 20% or 45k they expected the put down
- if you want the deal to happen, you drop the price to 200k
- or you both suck it up, and drop your price so the buyer puts a little more down and you get something between 200 and 225k
In this market, and having already had a deal fall thru, I'd be trying to work out a compromise so you could get the sale done.
Posted by: Bklnite at May 13, 2009 12:06 PM
As someone pointed out above, it's extremely difficult to get an appraiser to change a report. I did it recently, because of clear errors both on my property description (missed a floor - whoops) and also the comps they used (wrong sales prices etc.) and even then it was a huge hassle to get them to admit they made a mistake. If there's any element at all in the appraisal that's based on judgement, professional opinion, etc. they're not going to change. That probably goes for square footage too unless it's grossly wrong.
Posted by: NorthHeights at May 13, 2009 12:08 PM
This is a joke, the appraiser is just doing what everyone on the blog does, appraise the property 20-25% less than asking. Look in the mirror, everyone here does the same thing.
Posted by: billyboomer at May 13, 2009 1:17 PM
I'm guessing reading or doing research into the new regs isn't some of your strong points. New banking REGULATIONS (ie HVCC requirements - ie LAWS) state that the banks, brokers, etc CANNOT HAVE ANYTHING TO DO WITH THE APPRAISER. They are chosen at random from a pool by an uninterested 3rd party. They get only the contract to go by - cannot talk to anyone involved on the seller, buyer, broker, or banker ends until after they render the appraisal to paper, and it is binding and non-negotiable. Some appraisers were not even certified under the new rules if they had prior questionable dealings in the past. I know of one personally who was not re-certified. Like stated before, on a refinance, they don't even get a value to shoot for - the bank basically says, "I dunno, you tell me what it's worth".. This is supposed to bring prices in line with ACTUAL VALUES instead of bloated, artificially inflated values brought on by these very things that got us into this mess to begin with. Sheesh. The old days are over. Let's repeat it together --- OVER ----. If your house didn't appraise, it's because regardless what you paid, it's NOT WORTH THAT PRICE.
Posted by: williamsburgguy at May 14, 2009 12:16 AM
What ! You mean if I bought a million dollar condo it might only be worth 200,000 dollars. Sounds like a big Ponzi housing scheme to me.
Posted by: hannible at May 15, 2009 11:03 PM
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