Home Sale Dilemma - Low Appraisal

truffles17August 12, 2012

I've been reading this forum for years, but have never had a huge need to post until now. My husband and I listed our home at the end of January of this year. We had 2 price decreases (at our insistence) and a decent number of showings. We got an offer at the beginning of July for close to asking price plus seller's assist. It wasn't the greatest offer, but given the current climate, we felt any offer was fine so we didn't counter anything back and accepted it. We have land that we want to build a house on. Due to lending requirements, our bank wants us to sell this house before they will lend money to build a house.

The appraisal just came back this week. Sale price was $120,000 with up to 6% seller's assist. The appraisal came in at $110,000. We were already going to have to spend money to get out of this loan and now we are going to have to spend even more due to the balance on our loan being around $118,000. I'm not happy with the comps the appraiser used and was told that there is nothing that can be done about it. It is also a rural housing loan so our house is going to be tied to that appraisal for 6 months now. Our realtor has been working with the buyer's realtor and we have agreed to lower the price to the appraised price without the seller's assist. The problem is that the buyers might not have the money for seller's assist so the realtor said we do have the option to assist them with the shortfall. My husband isn't happy about any of this and is ready to walk from the whole deal.

Part of me wants to just sell it for whatever price, cut our losses and move on. We already have a rental place lined up (verbal agreement, haven't signed any documents yet) that I'm actually sort of looking forward to moving to. Also, I don't really like our neighbor that lives on the one side of us and we have had some verbal arguments in the past (a whole other story); I was really looking forward to getting away from her. My husband wants us to just end this sale and have the realtor take her signs down (our listing contract with her technically expired at the end of July) then possibly list it ourselves or wait until next Spring.

In this real estate environment, I don't see it getting any better and I think we should just take this deal and go. Our "competition" is older people who are moving to an upscale retirement complex that was just built and they can afford to list their houses at bargain prices since they have been paid off. If you made it this far, thanks! I don't really know what my question is, but just looking for some feedback regarding other's thoughts about this situation.

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brickeyee

The real estate bubble has popped everywhere, with only a few places now starting to come back to modest growth.

between folks selling paid off houses and the foreclosures the market is pretty messed up.

One of the changes to try an prevent a repeat has included 'arms length' appraisals.
Banks do not have any say in the individual doing the appraisal, but must hire an intermediary who then assigns an appraiser.

Unless you see the market in your area recovering, taking a loss may be the only option if you must move.

    Bookmark   August 12, 2012 at 4:01PM
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turtleshope

truffles, I think your assessment is correct. You are fortunate to have a buyer, and not to lose an even greater amount. You didn't say when you bought the property, but if it was in the last 10 years you are likely to see a loss. If it was me, I wouldn't gamble that the market will recover quickly and/or that an appraisal 6 months on will come out that much better.

    Bookmark   August 12, 2012 at 5:25PM
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truffles17

We bought this house about 6 years ago when we were newly married. Two dogs and two kids later, this house is starting to feel very cramped! It is a great starter house, but I think it is time for us to move on.

    Bookmark   August 12, 2012 at 5:37PM
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EngineerChic

I am like you, I would want to be DONE with it all. Have you talked to your DH about the potential upside of selling now, even at the reduced price?

Here are some things to consider using as points if you want to sway him:
1) if interest rates rise, it puts houses further out of reach for people because their payments rise. This can depress housing prices, and rates are crazy low right now. They probably won't increase soon, but they have to increase eventually.

2) how does your monthly budget look in the rental as opposed to the house? Will you save a couple hundred bucks a month on lower cost or lower utility bills?

3) if you take it off the market and relist in the Spring will you feel like all that prep work is looming in your future again? Every time you scuff a wall or scratch/stain the floor will you think, "Crap! Another thing we better fix before March when we list the house again!"

For me, the sense of relief that a difficult task is over is worth a lot, so I'd be inclined to go forward with this deal. How much of a seller assist are you looking at?

    Bookmark   August 12, 2012 at 5:47PM
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truffles17

EngineerChic:
We have weighed the pros and cons of some of the things you have mentioned. This is an older house and if we wait, there will probably be a lot more things we will need to do in order to sell it. Even now, I get agitated if the children bump into the walls or slam doors!

Our rent and renter's insurance will be about $300 less than our current payment/taxes/insurance. Utilities will be about the same since we will be required to pay them in the rental, but the house is smaller so there may be some savings there.

I think we could recoup the money that we have to use to get out of this house in a timely manner as long as I stick to the savings plan that I came up with. DH is also trying to sign up for overtime at his job (which comes and goes in spurts) so we can put money back into our savings account.

    Bookmark   August 12, 2012 at 6:05PM
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truffles17

EngineerChic:
I missed your other question. We were going to pay up to 6% which on the original offer would have been about $5,800. Our realtor contacted the LO at their bank and their closing costs now look to be about $3,500 based on the new price. Even though she wasn't supposed to, I guess the LO told our realtor what they have in savings and I guess they have about half that. DH doesn't want to give them any seller's assist. I'm willing to maybe give something. So, it looks like we would have roughly $1,700 to haggle over.

    Bookmark   August 12, 2012 at 6:08PM
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gaonmymind

I would seriously move on. After 6 months you have a strong buyer. I am building a house right now, but before that I was looking to buy. When I saw a property delisted then relisted at a higher or lower price FSBO I stayed away. I just figured the buyers were hard to deal with and their realtor dropped them or there was a serious defect that cause the agent to walk away. You can see the pricing history on any property.

If you move to rental and penny pinch you could make that $1700 up in no time. And to be honest I think that is a minuscule amount of money to lose a buyer over in this market. You may regret not taking it. Also interest rates are so low right now. If you are looking to build you want to try to lock in right now.

    Bookmark   August 12, 2012 at 8:08PM
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truffles17

We actually have to kick in a lot more than the $1700 based on what we still owe. That is just their closing portion. The buyers either need to come up with that or we have to assist them with it, but yeah, I would rather just give it to them than lose this whole thing. I'm hoping they can come up with it though.

    Bookmark   August 12, 2012 at 8:19PM
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kats_meow

If it was me I would take the loss and move on. (In fact we did do that last year, selling our house for 10% less than we paid for it about 5 years earlier...we have no regrets).

    Bookmark   August 13, 2012 at 2:57AM
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Billl

" So, it looks like we would have roughly $1,700 to haggle over. "

Unless that amount is a make-or-break to your budget, I'd just push this through and take the hit.

Frankly, if you get through as a sale of 1 house and the construction of another and this $1,700 bump is the biggest problem, you'll be doing better than 99% of people who try to build a house.

    Bookmark   August 13, 2012 at 9:29AM
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cearbhaill

Take it and get on with your life.
I would do whatever I needed to do in order to not have to deal with it as an ongoing issue for another year.
That would be treading water IMO and it is worth something, at least to me, to be able to move on.

    Bookmark   August 13, 2012 at 10:54AM
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truffles17

The closing costs were incorrectly calculated and we may have to kick in around $3200 to make this happen. Just today a house in the "good" part of town got listed very low so I don't see the market here getting any better any time soon. DH and I are going to find the money somewhere and finish this.

    Bookmark   August 13, 2012 at 6:58PM
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EngineerChic

I think you are making a very wise decision. As hard as it is, it will be better in the long run.

    Bookmark   August 14, 2012 at 8:05PM
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truffles17

Thanks! I feel like this really is the best choice.

    Bookmark   August 14, 2012 at 8:53PM
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polie

I think it's very wise, too. You're better off this way.

    Bookmark   August 14, 2012 at 10:06PM
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