I understand wanting a good deal but if you feel that you would take the chance of walking away from the house it may have not been right in the first place. I can't imagine you negotiated an offer that is going to not meet the appraisal and if it does you can walk away. It is definitely a buyers market but not everyone has to do a short sale nor give their house away.

Our contract has a clause that says the house has to appraise at or above the sale price or we can get out of the deal, but in this market, is paying appraisal value crazy?

Its pretty standard that the house has to appraise at the mortgage amount or the buyer can withdraw from the offer. Its only reasonable. Every house is a good deal right now. Homes are at the lowest price they have been in years. What makes you think a seller would sell you a house for less than the appraised value in the first place?

You make your offer BEFORE the appraisal is done. If you expect the seller to sell you the house for less than appraised value, do you think the seller should expect you to pay more for the house if the appraisal comes back higher than your offer?

That's a good way of putting it.

Tell me......did you know the comps BEFORE you made the offer, or look them up after the fact and then felt deflated?

It makes sense to know the market value on purchases. It is a baseline for decision making. But.........buying a property you really want and paying a fair price for it doesn't necessarily mean you made a poor financial decision just because somebody else bought a comparable property for less.

Is paying appraisal value crazy? I hope not. After the real estate market starting falling like a deck of cards, I purchased a parcel of land I really wanted for a long time. I paid twice the going price for it. It was a lot less than the seller wanted to get and a lot more than I wanted to spend, but I haven't regretted it yet. It is now evaluated at exactly what I spent for it and I wouldn't care anyway. There would always have been and always shall be people who paid less for their land and more for their land. Found out the folks who bought the parcel adjoining it paid twice what I did. So evidently they felt the same way. LOL. God knows where the chips will fall before real estate establishes a even keel. It isn't always about finding a 'bargain'. Sooner or later you just gotta ask what's it worth to me.

We did make an offer. The house is listed at $695,000. We offered $640,000. The most recent sale in this neighbor hood of 15 homes was $679,000 last year. Others last year are the ones that were builder buyouts at $500,000 and $555,000. I'm thinking they will have to go out of this patio home neighborhood to get additional comps and the prices on other homes in the development have sold in the mid to high $600,000's and low $700,000's. However these houses are about 1200 square feet bigger than this one.

We thought offering $640, she'd come back at $680,000, and we'd end up somewhere around $660,000-670,000.

This is also a cash offer, so the appraisal process would be done independently of a bank loan process.

She just thinks her house is worth $695,000. I'm thinking maybe more in the $670,000's. So where we are as of right now is I've asked my realtor to contact her and find out whether or not she's willing to evaluate her non negotiable price if the appraisal doesn't come back at $695,000.

I'm thinking she'd be crazy to not do that because I don't think many people would buy a house that doesn't appraise at or above the asking price, especially unlikely if they need a mortgage.

She tells us she arrived at her asking price based on "an appraiser's opinion" it wasn't an official appraisal. This woman is a realtor and I think she got a friend of hers to walk through the house and confer that the asking price was fair.

I guess we won't know unless we do an appraisal!

Has this seller met you?
I other words, could she have a good read on how much you love this house, and be betting that you will overpay? Perhaps 'overpay' isn't the right word, not knowing what the house is really worth -- But then 'worth' is relative anyway...

It sounds like your appraisal will be less than $695. Whether she will take that really depends on how much she wants/needs to sell.

Personally I don't like the whole situation and couldn't see myself doing it. She is a flipper - right? She is an agent and might personally know people that do appraisals and do mold remediation. There may be some relatively underhanded things going on. Probably not but maybe - seems like a big gamble from my distant perch.

I think the latent mild hostility in the prior replies is really interesting. Frustrated sellers? Agents? I don't care if YOU think the house is worth $695 - you are right to question the price based on the comps. I don't know why that is an issue that ignites hostility.

The house has only been on the market 10 days. We get email notices as soon as a house is listed, and this one caught our eye immediately.

So, she hasn't felt the pain of a slow market in trying to sell this house which is why I think she's sticking to her price. Also, they have spent alot of time and money fixing up this house and I think she's also emotionally tied to the home.

She has agreed to negotiating on price based on the appraisal, but only after a second one is done. So I guess the plan is we have an appraisal and if it doesn't come in at the asking or near it, she will pay for an appraisal and we'll see where that one comes in at and go from there.

I agree that she knows some folks in the business and could potentially sway an appraiser, but honestly, the comps are what they are. Not a ton of houses selling in this area at this price point, and those that are selling are larger and the ones that are around the same size are selling for less, so we'll see.

'I think the latent mild hostility in the prior replies is really interesting. Frustrated sellers? Agents? I don't care if YOU think the house is worth $695 - you are right to question the price based on the comps. I don't know why that is an issue that ignites hostility.'

David, that's a legitimate question and I think one reason it elicited that response (in me anyway) is the thread amounts to second guessing if they did the right thing. If there is any question about comps and prices in the buyer's mind it normally occurs before one makes an offer and signs a contract. The horse is already out of the barn, so to speak.

I'm not hostile toward the poster (wish her luck) or frustrated. I just can't wrap my mind going into a purchase of that size almost appearing to wish an appraisal is going to fall through so they can haggle about what something is worth retrospectively.

Well, we got the appraisal today and it appraised at $600,000. Less than we actually thought it would be and obviously much less than the $695,000 asking price which we felt was too high.

The seller, who is also an agent, has the option of paying for a second appraisal which is happening Friday afternoon. The comps our appraiser used were two sales and one refinancing. All three done in the last 60 days. The comps are houses in the same development, but they are larger 4 bedroom homes with 3 car garages and larger lots - so based on their sale price not being significantly higher and in two cases lower than this house's asking price, the appraisal reflects this. Sales on the street and the next one over in the immediate area around the house were over 1 year old and a mix of low prices and one fairly high one. Our appraiser felt they were too old to be used.

We are interested in seeing what the new appraisal comes in at. Literally, the three comps are the only sales in this development in the last 6-8 months. So, what are the odds the appraisal will rise dramatically closer to her asking amount?

And if it does come in $15-30,000 more what would your advice be in negotiating a fair price?

I guess I should change my post to what to do when two appraisals are done and they aren't the same? I'm guessing this because I think she has some friends in the business and will influence them to bring up the price in the second appraisal.

Which appraisal is the most valid - I guess that's the question of the day.

When we sold our house, my agent and the buyers agent were present. I was also present. The buyers bank sent a local appraiser and both agents knew him. They were all chatting and friendly.

There is no doubt in my mind that they influenced his appraisal. There was a good risk that my house would appraise low because of a comp on my street which sold for almost $400,000 less than my accepted offer. There were some valid reasons for the difference in price, but my agent was very worried about the affect that comp would have on my appraisal.

She walked around with him, told him about the comp and all the things wrong with that house. He listened and made many comments about the area. The buyers agent didn't object.

My house appraised to the penny of the offer. I don't feel anything was done illegally, but do feel they influenced his appraisal.

Jane

I recall reading a newspaper article a couple years ago that said that RE Agents selling their own houses tend to get higher prices than other people do. The house has been on the market for a short time, so she's feeling no pain and she knows you are highly interested. And you know that she didn't price it at her rock bottom price. In my opinion, based on the above, you need to bargain hard with her and be prepared to walk away.

Well, the second appraisal came in today at $700,000. A $100,000 difference between two appraisers.

When we had the first appraisal done we did not offer any comps based on our research, what we had contracted for as the sales price or thoughts on the price of the house. We wanted an unbiased valuation done.

The seller, who's also an agent, gave both the initial appraiser and the second one comps that she felt they should use to value the home. The initial appraisal included only 1 of these comps that sold in June of this year. Obviously, the second appraiser did as she asked and used comps that were old when newer sales were available.

I don't have a problem with paying a fair price for the house, but I do have a problem with paying a contrived price. We have gone back to the seller asking to renegotiate the sales price or get a third appraisal from a totally unbiased appraiser.

The second appraisal included a sale from 12 months ago that favored the seller, but didn't include two other sales within 30 days of that sale which would not have favored the seller.

Perhaps we shouldn't have ever signed a contract for a price we felt wouldn't appraise, but the seller would not budge on the price and we decided if it did appraise out, then fine the house was an appropriate price point and we'd buy it.

Am I being naive or is a $100,000 difference a major red flag? My husband was a broker in FL years ago, and thinks we should submit both appraisals to the licensing board and submit a complaint and let the real estate board figure out if the seller acted unethically.

That much difference is a real red flag.

The feds just changed the rules for who selects appraisers.

At least for conforming mortgages the selection must be 'arms length.'

I know nothin' about nothin' but that seems very fishy to me.

I have two comments:

1. What appraisal value is your mortgage company using? If the mortgage company is using the first appraisal value then the second one doesn't really do much from the standpoint of your getting your mortgage.

2. What does your contract provide as to when you can get out of the deal? If you can get out based upon the first appraisal or not being able to obtain financing based upon the price of the house v. appraisal then you are in a stronger position. If you agreed, however, that you would buy the house if the seller got a higher appraisal even if it didn't appraise for your mortgage company then you may have a more difficult position and need legal advice. (I hope you didn't make any such agreement). I suggest you consult with an attorney regarding your options.

1. This is a cash deal, so not mortgage was involved.

2. The contract did state that the house had to appraise at or above the sales price, the seller did have the option to having a second appraisal done - which she did and it did appraise to her price.

Our agent is talking as we speak to the seller and telling her that we feel the difference in appraisals is suspect and that since she is not willing to negotiate a price somewhere in the middle or to agree to a third appraisal then we want to walk from the contract.

We have a home inspection scheduled for tommorrow and know there are some issues that need resolved, so if she gives us a hard time my realtor feels we go ahead with the inspection and then walk based on the findings.

I documented in an email specifically where we felt the 2nd appraisal was way biased and listed two sales in the last 30 days that could have been used vs. one from 12 months ago, so if she gives us a hard time, we will pursue this with her broker or the real estate board. I believe they will give us our money back based on the fact there is some ethical issues with her providing comps to the appraisers etc.

But I guess we will see. The problem is we really like the house and would still buy it, but feel we're being railroaded into a sale based on bad comps and if she's not willing to work with us, then it wasn't meant to be.

Since she hasn't agreed to your offered price, there is no contract yet, right? So nothing to walk away from.

She is under no obligation to sell you the house for the price you want. Obviously you really want this house, there must be some very special things about it that make you want it more then other houses for sale. These special things could make it worth the price she is asking.

If you really don't want to pay her price you could wait it out for a couple of months and see if she sells it. If no one buys it she might be more willing to lower the price, but then again maybe she still won't. She might not be in a hurry to sell. And of course you chance someone else snapping it up.

I am curious what about this house makes you like it so much?

Caroleoh,
The appraisal that the sellers appraiser did would not be valid if this was for a lender... plain and simple. Comps have to be within 3 months and sales w/in the subject neighborhood have to be used before any comps outside the neighborhood. It is just that simple. If it would not be good enough for a lender, it should not be good enough for you... especially since the differences are sooooo much.
Actually, she is in more of a pickle than you are, unless she really does not care to sell. Most buyers are going to need financing, therefore she is stuck at what the first appraiser valued the property at. Even if another cash buyer comes along, the parties are going to be right back at square one.
The seller has not done anything unethical... under the new rules, agents and sellers are able to suggest comps to be used, and to point out unobvious upgrades to the appraiser. To me, it was the appraiser who unethically used comps from 12 months out, when there were two others that were recently sold. He knows darn well that a comp from 12 months out is no good in this market.
I would call her bluff, cancel the contract, write her a detailed letter explaining that she will be facing the same scenario even if she gets another buyer, and wait her out. If she really is a seller, she will come around.

ncrealestateguy - that's exactly what I did. I sent a lengthy email to my agent knowing she would pass it along to the seller.

I listed two sales in June in the development that should have been used as comps. In addition, I mentioned specifically that if the appraiser felt that the high ended sale was comparable then he should have used two others that were much lower sales that occurred within 3 months of the high end sale - all three within 5 houses of the house we wanted to buy. In addition, I spoke to the second appraiser and suggested this and his comment was he had actually done an appraisal on one of the two lower sale price homes himself - but again, he didn't include it I'm sure because it would have lowered the overall appraisal.

We elected to walk from the deal because we felt we were being railroaded by a seller who wouldn't compromise over two comps so far apart.

We suggested that we either renegotiate a new sales price or have a third appraisal done by an unbiased, appraiser that neither real estate agent had ties to. She wasn't interested.

I think the whole thing was based on the fact she felt the house was worth the asking price and since it had only been on the market 10 days when we wrote our contract, that perhaps she could find another buyer fairly easily.

My agent told her finding a cash buyer in this market for a $600,000+ home would be difficult, and anyone going through a bank loan would find the same issues with the appraisal.

Happiladi - what we loved about this home was it was in a beautiful country club development, but it wasn't a cookie cutter mcmansion like the other 5000+sq foot homes. It was in a 15 home "cottage" section where the style was more Nantucket beach homes. Shingle siding, wide white trim - large windows and the insides were very well detailed with trims etc. The floorplan was different than the normal area homes and it was 3316 sq ft on two floors and a huge 1400 basement with a 4th bedroom and bath.

It was just the right size, style everything! We just felt that in this market she needed to work with us a bit on at least doing an appraisal where the comps were recent or even included 3 from a year ago in the same 15 unit cottage neighborhood.

So, we'll see what happens. If she finds a buyer who will pay that amount then we may be sad that perhaps we should have bought it, but in my gut, I think it will sit there for awhile or she'll have the same issues with the next buyer and the appraisal process.

Tell me if I've gone off the deep end on this one...She bought this house in foreclosure in 8/2008 for $435,000. Three houses next to hers sold in May/June 2009 for between $500,000 and $555,000. Two of them were builder short sales. July of 2009 a house down the street that backed up to the driving range and was not any bigger or better than any of the other houses sold to a real estate agent for $679,000. This is the sale the appraiser used as a comp on our deal. I almost feel like she and this other agent are in cahoots to raise the prices in the development and I wouldn't be surprised she's giving him a kickback on her sale for buying his at that price. Why would someone spend $125,000 more on an inferior located house? I know this is probably an irrational thought process, but I'm befuddled why she would be so greedy holding out for $40 -50,000 more on a sale in this market. Most houses in this development have been on the market for well over a year. Buyers for $500,000+ homes are just not plentiful right now.

Ok, I'm done venting, and am moving on!

Good for you. You are probably right that they are trying to control the prices of the homes in the community. We ran into that with a Townhouse development which was owned by the builder. He wouldn't budge on any of the homes and let them sit for over a year. He finally made deals with buyers so they would show (on paper) that they sold for list price.

We found out he would offer to pay their first year mortgage, closing fees, etc. to keep the selling prices up. He eventually sold most of the homes. We walked away from them.

Jane

It's gotta hurt right now--I had to make a somewhat similar decision to walk away from a home I loved due to negotiation issues. But, it SOO worked out best for me, and I'm sure it will work out best for you. You did the right thing by walking away, now you just have to be patient to see how it all plays out (either you'll find something even better, or she'll come crawling back hoping you're still interested)

That mold problem would scare me. Even though it was remediated. So I think you're well out of this one.

Yea Blueheron, I thought she was being pretty bullheaded on the price taking into consideration that house had a mold problem and sat empty for a good while.

Most people wanting to buy are not going to be able to pay cash and avoid a mortgage....
if she tries the same tactics with someone else trying to buy the house AND get a mortgagae it is going to blowup in her face--
she cannot control who is going to do the appraisal for the mortgage company like she did the second appraisal...
that house is going to be on the market a while

MOST people would have reservations about buying at full value--her asking price--with the mold history.

IF you don't find another house you like better in a month or so--that one is probably going to be onthe market...BUT you are going to have to use an agent to buy it...
she won't want to deal with you and all you know on a second negotiation...

Our situation was somewhat similar..
the house we are currently living in we bought about two years ago when the market/economy was starting to go sour. Our market in DFW had stayed strong longer than most and there was still competition in certain areas for new homes on market. We made offer on this house which the comps showed was overpriced and the sellers (who had built the house) argued that our offer was too low.

They said it would cost more to rebuild the house...
we said we would pay for appraiser to get 3rd party opinion. We got someone who was familiar with local area--had been past president of the RE assoc before becoming an appraiser...he took comps from past year of homes in neighborhood--some were foreclosures because this neighborhood has some real issues with topography and the economy had hurt sales--

it is also he most expensive neighborhood in this town--the last open land to be built on.
Well the appraisal came in with a substantially lower value--done three different ways-- one was at least 30K lower than what seller wanted...

he refused to budge off his price more than 10K--and my husband wanted the house
we were paying cash as well...and we were the first/only people to offer on it because it was new on the market too.
I would have preferred to wait but not my husband...
so we bought the house...for more than the appraisal--
really frustrated me because I don't think we will see that money when/if we go to sell..
Frankly I think the house would have sat here for long time...there are houses in the neighborhood that have been on the market for over a year and not sold...

There are reasons why this house was a better buy than the others but the appraisal was pretty spot on since most homes up for sale are trying to hold to the higher price per sq ft and people are not buying...

Loves2read, I hear you. Sounds like a very similar situation - although we walked and I really went through a simple grieving process because we really liked the house.

So a week has gone by, my realtor calls and says the owner/agent called her and extended a "standing offer" (not exactly sure what that means)of $675,000. $20,000 off the asking price. She told my realtor that she figured we wanted them to split the difference between the two appraisals, which would put the asking price at $650,000 but she's not willing to go there. A week ago, we probably would have said ok.

Today, I'm feeling like you screwed with me and now you want to negotiate!??

My husband is out of town this week, and I feel like we need to go see the house again.

Do we just hold out for the $650,00?

I told you she'd be back...
I would hold out. No buyer with financing is going to be able to get a loan at her price, and the seller knows it.
Tell her that you appreciate the fact that she came down $20,000, and let her know that you will do the same by coming up $20,000 ABOVE the appraised value... $625,000 and no more.
Good luck.

The plot thickens...the house down the street that backed up to the country club's driving range and isn't as big or as nice was listed at $599,000. They just lowered the price to $499,000.

I think that will make her nervous too. In fact, we may have to go look at it! My hubby isn't really enthused about having a golf range in our backyard, but it would be convenient! :-)

My only real stress is that my son starts school on 8/23. I either need to pay his private school tuition where we are now or we need to buy this house so I can register him at the new school district.

They're about 25 minutes apart - DH thinks we wait and pay son's tuition $3800 and if we move in December so be it. We eat half a year's tuition. I'm more worried about the social aspects of acclimating to a new school mid year - he's in 7th grade.

I would wait for your price. regarding the other house, if you don't like the "location" with the driving range, skip it, some things really are dealbreakers.

I wouldn't have gone about the buying process the way you are. you should stick with whatever you think the house is worth and hold for that.

if you have 1 appraiser telling you 600 and another at 700, I'd be pretty comfortable knowing that its somewhere between 500 and 800. this isn't a real science and apparently "experts" can be off 100K. If you thought it was a 625K house, then offer that and stick to it dispite your lower appraisal and their higher appraisal.

I wouldn't let appraisals decide the price you're paying.

She's running out of time too. She knows when school starts and most families want to be settled by then and will wait until next year to shop. I would stick to my price.

Jane