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…
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!
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.
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.
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.
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.
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.
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.
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.
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.
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).