House sale hinges on appraisal

karen_76April 1, 2009

We got an offer after 13 months on the market, and we accepted it after some negotiation. We passed the home inspection with flying colors, so now we're just waiting on the appraisal. The problem is the only houses that have sold in our immediate neighborhood in the past year were 3 foreclosures and one ranch that sold extremely low (must have been a desperate situation). Both set of realtors are worried the appraisal will come back lower than what we've agreed to sell for (and we really can't go any lower than that as we're already PAYING money to sell the house). Our realtor sent the appraiser comps for neighborhoods just outside ours--some of which sold for more than ours, but we're just very nervous that this one thing could hold up the sale of the house. And if it does, it's not likely we'll ever get it sold in this market because we'd run into this issue every time! Any thoughts or suggestions?

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triciae

karen,

I don't think there's a good solution for your problem.

Appraisers are very cold-hearted creatures. They focus on square footage, number of bedroom/baths, fireplace, age of property, etc. They use a bit more discretion when considering things like location, quality, & condition.

Even the condition/quality though is pretty cut & dried. Usually they rate the property as either poor, average, or above average. That's it. They don't go into much detail about the new paint you worked so hard to get on the walls before listing, the brand of appliances in your kitchen, or even floor coverings.

They 'should' make some note if the recent comps are foreclosures or short sales but, as you know, those distressed sales do contribute to lower overall neighborhood values.

It's certainly a good idea to have your curb appeal as good as possible because first impressions do matter but much less so with an appraiser than a potential buyer. There's no way around it...they are just fact oriented.

BTW, I have no idea why GW is putting those links in my post. I did not do it & I hate them. Until today, I've been able to avoid them.

Best of luck.

/tricia

    Bookmark   April 1, 2009 at 3:14PM
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theroselvr

Hi Karen, that was a big fear of ours last year as well and why we did what we did when we ended up with a bidding war. We knew the house had to appraise or the buyer would have to bring cash or we renegotiate. We knew both were good for up to the amount we said yes to and did not worry it would appraise, any higher (on the offer) and yes, I doubt it would appraise.

I wish we would have been told what it appraised at, I'm curious. I know enough that I'll never find out. lol

Good luck. I can imagine how stressed you are at this point.

    Bookmark   April 2, 2009 at 9:46AM
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chrisk327

I thought I heard that Forclosures are not allowed to be used for appraisal purposes due to the distressed nature of the transaction causing unusual circumstances.

    Bookmark   April 2, 2009 at 3:51PM
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kec01

We're in the middle of our block. The neighbors 8 doors down have the identical house to ours (interior decor is different, but all else the same). We both refi'd at the same time, starting in Jan., but with 2 different companies. We both had in the house appraisers. Our appraisals were $50,000 apart.

I hope yours works out ok.

    Bookmark   April 2, 2009 at 7:16PM
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fixizin

Sadly, after years of shoveling 0% down FHA mortgages at meth addicts, foreclosures are valid comps! Yep-sir-ee, Bob! Have you seen the FHA stats on the number of their loans that defaulted with only 0 or 1 payments EVER made? Decent folks cannot even comprehend this scenario, yet it was widespread. =:O

Welcome to the United States of Bezzle. (see Galbraith for definition of "bezzle".) All decent folks are victims.

Anyway, as roselvr points out, it's not the actual sale that hinges on the appraisal, but rather how much $$ the buyer can finance, vs. how much CASH buyer has to put down. EVERYONE has to put down more cash these days. No sense shopping, and calling yourself a serious buyer, if you haven't embraced that. RE Agents should be actively educating buyers in that direction.

kec01's story is no doubt true, but there's no way your buyer's lender is going to let you "cherry pick" a "compliant" appraiser who is to your liking. Especially since "compliant" appraisers are amongst those guilty for "the bubble", and are now "pulling it way in" and being MUCH more conservative.

I don't know your carrying costs or opportunity costs, but keep the spirit and momentum of negotiation moving forward. This appraisal will give you a good (and perhaps shocking) picture of your bid-offer spread, and how much $$ down a serious buyer needs in this sad market.

Your agent's job is to convince buyer that this is the market "bottom"... good luck.

    Bookmark   April 2, 2009 at 8:37PM
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galore2112

" thought I heard that Forclosures are not allowed to be used for appraisal purposes due to the distressed nature of the transaction causing unusual circumstances."

Let me guess: Someone from your local tax appraisal district told you that LOL!

    Bookmark   April 2, 2009 at 10:14PM
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terriks

Welcome to the United States of Bezzle. (see Galbraith for definition of "bezzle".) All decent folks are victims.

Okay, I looked up "bezzle" (links are appreciated) and found this.

Here is a link that might be useful: Info on the

    Bookmark   April 3, 2009 at 12:39PM
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bushleague

I think you'll find that the appraisal will be very close to the purchase price. It would be interesting to see how close the appraisal would come in if the appraiser did not have sales price information. Believe it or not there is still 10% down paper out there and these guys are doing manual underwriting and not using DU. There's even a broker with a minimum 660 fico. Sub prime gone? Ya okay.

    Bookmark   April 5, 2009 at 8:02PM
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stir_fryi

Happened to my neighbor last May. Agreed to price was 328 -- house appraised for 300 (shocking us all). Final sale price 300.

It was a corporate transfer so all my neighbors were required to do was get a signed purchase agreement so they ended up getting the 328 from their employer.

Sadly, no other homes have sold in our 'hood since then. The ones that are listed are all listed for 299.

    Bookmark   April 6, 2009 at 12:47PM
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karen_76

Well, we had the appraisal last Thursday, but we're still waiting to hear what happened and if the buyers' bank accepted it. The waiting is awful!

    Bookmark   April 6, 2009 at 5:06PM
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fixizin

Paging karen_76... come in Karen, over!

    Bookmark   May 26, 2009 at 4:31AM
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believer

I think it will definitely help that the appraiser will have the purchase price. We were going to refi our house this year b/f we decided to put it on the market. A "cold" appraisal was done and it appraised for $5K LESS than it did when we built it almost a year and a half ago, despite the fact that since then we finished our bonus room and ADDED 350 SF!! I can't imagine what it would have appraised for without the extra square footage. Our current asking price is $50K less than we have in the house. If we do sell, we may end up losing more than that (though we're limited to what we will lose, since we won't take less than what we need to pay off the bank and our agent!) Good luck!

    Bookmark   May 26, 2009 at 10:55AM
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karen_76

You were paging me, fixizin? What can I do for you? :)

    Bookmark   May 26, 2009 at 7:00PM
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erinb007

"Anyway, as roselvr points out, it's not the actual sale that hinges on the appraisal, but rather how much $$ the buyer can finance, vs. how much CASH buyer has to put down. EVERYONE has to put down more cash these days."

This reminds me of a question I have been meaning to ask, If someone puts say 50% down, are the appraisers likely to be more lenient and appraise the house higher/closer to the sale price? Ie, the bank is less likely to take a hit . Thanks

    Bookmark   May 26, 2009 at 9:11PM
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erinb007

Hi, sadly they count the foreclosures:
article from today CNN Money

Here is a link that might be useful: foreclosures are counted in appraisals

    Bookmark   May 26, 2009 at 9:19PM
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fixizin

You were paging me, fixizin? What can I do for you? :)

Well, not just me, but everyone on this thread was waiting to hear:

a) what $$ number the appraiser came up with?
and...
b) what buyer's bank/lender said, yay/nay...

In the info-sharing spirit of these useful forums, even bad news has to be shared... only works if the OP reports back and closes the "loop"...

Thanks in advance, ;')

    Bookmark   July 26, 2009 at 5:44PM
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