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!
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.
No recourse. Accept the appraisal now or less later. Welcome to the crash. Real talk.
***Bid half off peak comps***
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.
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!
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.
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.
yOu could request and pay for a second appraisal…..
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.
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