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Sellers Unfazed by Reality (another deal's death by appraisal)

Posted by inexplicable (My Page) on
Mon, Jul 27, 09 at 1:50

I need some of you people on here to tell me I'm not crazy. I'm a longtime reader, we used to have an account but I lost the login/pass/email.

Been trying to buy a FSBO since the end of April. House is classic Prairie style, got some original woodwork, great lot and yard, great location, in good condition but not turn-key remodeled. In a small town where values have been steadily dropping all year.

We knew the house was overpriced from the start. Sellers were asking $275K, and made it a point to tell us that they had started at $289K, which was just downright laughable. Eventually got them down $8500 to $266,500 which we still thought was high, but we really liked the house, despite the face that it lacks a furnace (they inexplicably ripped the old one out and never replaced) and we live in a state with about 8 months of cold. House is also going to need a new roof sooner than later, plus the furnace.

Took forever to get a signed contract and the financing process went slowly. We of course had an inspection but were warned "we're firm on our price" regardless of the results. Inspection didn't reveal anything major, just a bunch of stuff that any normal person would have taken care of if they were trying to sell a house: open spliced wires with no junction box, etc. Inspector suggested we bring Roto-Rooter out to check the sewer line as it is cast iron and could likely be due for a replacement in the near future. We foot the bill for that, and the sellers make a point of reiterating that they are not budging if we find anything. It was pointless to suggest to them that checking the sewer line was for US to either continue moving forward or walk away, NOT a chance to nickel and dime them.

So we tell them we don't want anything from the inspection done except for that one junction box to be covered... you know, so someone doesn't get ELECTROCUTED before we close. Then the appraisal comes in: $23,500 less than the selling price.

We say -- we'll pay the appraised, market value for the house, and not to worry about the electrical.

They say -- we're firm -- how about we carry a 2nd mortgage for the "lost" $23,500?

We write them a long letter explaining how financially irresponsible it would be to buy a house for $23,500 over its current market worth, especially in a market that is going nowhere but down.

Can you believe these people? In this market, in this economy? I tried to explain how no bank will lend above appraised value... Their only hope is someone a) with cash in hand to purchase outright and b) doesn't want to know what the house is worth.

So now it looks like because of this one person's stubborn ignorance, we have lost over $1000 in fees, countless hours, and my family has no place to live starting next Saturday. (we had to break our lease)

Yes, I know: it is I who am foolish for thinking these people would change... They have basically showed us how uninformed they are from the beginning and have showed no graciousness or courtesy... not that those are to be expected in a business transaction... But common financial sense is.

Somebody either agree with me so I can feel better or argue with me so I can fight with you... :)

p.s. We had an appraisal contingency so we get the earnest money back; I had lobbied for including that if it didn't appraise that we get reimbursed half for the appraisal... Everyone including my wife (sorry honey, it's true) thought I was crazy and "being difficult." I could just see the writing on the wall...

p.p.s I don't know the rest of their finances, obviously, but the sellers have a mortgage payoff of $139K having bought it for around $170K five years ago... I GUESS MAKING OVER 100K ON A HOUSE IS JUST NOT GOOD ENOUGH FOR SOME PEOPLE DURING THE BIGGEST HOUSING BUST IN HISTORY.


Follow-Up Postings:

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RE: Sellers Unfazed by Reality (another deal's death by appraisal

Wow, they are clueless! We're dealing with similar sellers. We are also buying a house that does not have a functional furnace, will need a new roof in the next year or so, and which needs new windows and they are still mad that "we aren't paying enough for it."

Appraisal for us came in at exactly the purchase price, which seemed odd...sometimes I wonder whether these appraisals are real.

I'm so sorry for what you are going through. I hope you find something else, and FAST!


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

What kind of heat are they planning on using?

No central heat would be a show stopper for most appraisers and banks.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

Serves THEM right; let them figure out how they're going to stay warm this winter. As long as they're staying they might as well fix the electrical and they'll also get a surprise soon when their plumbing stops working.

In the meantime aren't there a zillion other homes for sale that you can consider?


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

Sounds like you just need to move on. If the sellers don't want to sell their house near the appraised price, there is nothing you can do about it.

As for who is "crazy" that is up for interpretation. If they don't have a pressing need to sell now, they might be better off waiting for a market rebound. Nothing crazy about that. You, on the other hand, offered more for a house than you thought it was worth. I think that is a little crazy. You had a good idea that it wouldn't appraise for that value (hence 1/2 back contingency plan.) You knew that would torpedo the loan process, so what was your plan then? You became emotionally invested in a house you "love" and made some questionable decisions. It is a lesson that is going to cost you a few months and a few grand to learn.

Anyway, the bottom line is that if you don't feel good about a sale/purchase, don't do it! There are literally millions of other houses to chose from. You chose to go down a path you had obvious reservations about and it came back to bite you. Next time, you will know better.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

So they don't really want to sell.. that's their choice.
I don't think they are 'crazy' at all, especially when they told you from the beginning that they were firm on a certain price.

Move on... there are plenty of other house out there.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

Don't write a long letter. It will do more harm than good. Execute the contignecy through your attorney and walk away. You have been given a gift... The fact that the house has exposed wires / no furnace means there are probably other problems yet to be discovered.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

A lot of recent news articles seem to suggest that many recent appraisals are coming in lower than what seems to be the true market value of a property.

It could be that this is one of those situations and maybe the seller knows that the place is worth more? It is entirely possible that a different appraiser might appraise for $20k or so more. Otherwise, the seller is having a hard time realizing how low the market has gone, and soon they will likely come to their senses IF they really want to sell, which might not be the case.

What do you think the place is worth and does the appraisal seem to be using comparable properties and such?

I think that you need some time to cool down and also the seller probably needs some time to come to reality about selling their place(assuming the current appraisal is correct.).

You might get a call from the seller in about 2 months where they have lowered the price significantly. This will probably be when they see winter coming and realize they don't want to invest in a new furnace and would rather sell if they can. You will need to lose the emotional urge to tell them to get sc_ewed, and instead think about whether you want to go forward at that time.

Unless you buy another home between now and then. And that is what your plan should be.

You might even find something vacant and be able to move in within a few weeks.

Maybe you move to a hotel in the mean time and place your furniture in storage. Not fun, but hang in there and realize that there are some folks that don't have jobs/money and they are moving out of their homes with no place to go and they have the prospect of being homeless. You are fortunate in that respect, though your current situation is still a total bummer and very high stress.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

FSBO sellers seem to often have a high estimate of their homes value.

They look at houses in the neighborhood that have sold 'recently' and think they should get that price.

They rarely seem to take into account the upgrades and improvements the other houses have that they do not.

I would walk away unless you really want the place and can do a lot of work yourself, since there is likely plenty more undiscovered.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

Recently we, along with many of our neighbors, refinanced our mortgages. We found that the appraisals were all over the place - some way high, some way low and some about right. Some appraisers used accurate comps and some were so totally off-base as to make us wonder if there was any value in a given random appraisal.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

"FSBO sellers seem to often have a high estimate of their homes value."

VERY true - also, realtors who are selling their own homes. Everyone thinks they're sitting on a gold mine. It takes a third party, like a RE agent, to bring in reality. NO one should be buying now. Its the height of summer. Once winter comes and sellers realize they missed their opportunity, they'll drop their prices.

I suggest dropping the sale and wait til winter. If it doesn't appraise, no one else will buy either. Alternately, find another appraiser. ::shrug:: depends how bad you want the house.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

Some FSBOs are priced accurately, and they don't often stay on the market that long when this occurs. Same goes for realtor-listed homes that are priced correctly.

I have seen many realtor listed homes (not owned by realtors) that are way overpriced and they sit for years on the market.

Bottom line, if you are a buyer, you should know the approximate market value of a property before you offer, whether FSBO or realtor-listed.

To the original poster(inexplicable): What do you think the actual market value of this property is? Do you think the appraisal is way off base?


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

My guesses are:
that they are strapped for cash for whatever reason none of us will ever know
Not too clued in
Willing to walk away and let it go to foreclosure because that works more for them financially somehow
Know that the great lot, great yard, great location, some original woodwork is perhaps worth more than the appraiser said

You can - get another appraisal, see if the bank will loan more than appraised, walk away

I do understand your frustration though

Those throwaway comments above 'there a million other houses out there" are just that - throwaway comments by the standard unimaginative buyer and not for those who are looking for something particular within a constrained budget.


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Sellers like *that*...

... DESERVE to be low-balled! By both you and the appraiser! What kind of hoser allows his family to live in a house with obvious (and CHEAPLY corrected) WIRING faults?

And the FURNACE thing, WTF? I know of AHJs in the northeast that will DENY YOU A C.O. for such lack of major infrastructure! Throw in the shabby roof and it would require ALL my self-control to not be openly snide with such sellers! You "done good" to just remain civil.

Perhaps these sellers hit the HELOC "ATM", but spent it on everything BUT the house?... like maybe... recreational chemicals? =:O Very odd situation... as noted above, you might be picking up this same house in a foreclosure auction, not too far in the future.

Feel for ya inexplic... buying a home for your family to live in naturally gets more emotional than looking for an income property you'll never spend a single night in. Next time be working a few in parallel. Nothing wrong with that in a buyer's market.

PS: Don't do the long letter thing anymore... casting pearls to swine. But DO tell us more about the seller's appearance, behaviors, nervous tics, etc. ;')


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

marys1000,
As of May 1, 2009, the lender can not order another appraisal for the same client for the same property. Obama put a stop to that. The only way to get another appraisal is to get approved by another lender.
You say to ask the bank to loan ore than the home is worth... are you serious? Even IF the bank would loan more, why would any Buyer pay more for something than it is worth?
The sellers have every right to not sell. The way appraisals have been going since May 1, 2009, there is a good chance that the next appraisal may come in much higher.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

So now it looks like because of this one person's stubborn ignorance, we have lost over $1000 in fees, countless hours, and my family has no place to live starting next Saturday. (we had to break our lease)

Now do you believe them when they say their price is firm?

Your lost time, money, and shelter is entirely on you. They told you up front they weren't coming down. That is their right.

Writing someone a letter explaining why they are wrong and you are right regarding the asking price of their home is a sure fire way to kiss the deal goodbye.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

"They told you up front they weren't coming down. That is their right."

sounds like it's time for you to move on & find a home that'll work for you.

I wish you the best.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

You are wasting your time. The owner has every right to do what they want with their house. Move on...


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

Your lost time, money, and shelter is entirely on you. They told you up front they weren't coming down. That is their right.

creek_side, that's a bit unfair because there was no way to predict the appraisal coming in so low. The sale might have gone through but for the appraisal.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

"Your lost time, money, and shelter is entirely on you. They told you up front they weren't coming down. That is their right."

"creek_side, that's a bit unfair because there was no way to predict the appraisal coming in so low. The sale might have gone through but for the appraisal."

Not planning for things to go wrong is often a bad idea when the consequences are significant.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

"creek_side, that's a bit unfair because there was no way to predict the appraisal coming in so low. The sale might have gone through but for the appraisal."

But there was. It was quite predictable. From the top post in this thread:

"We knew the house was overpriced from the start. Sellers were asking $275K, and made it a point to tell us that they had started at $289K, which was just downright laughable. Eventually got them down $8500 to $266,500 which we still thought was high, but we really liked the house, despite the face that it lacks a furnace (they inexplicably ripped the old one out and never replaced) and we live in a state with about 8 months of cold. House is also going to need a new roof sooner than later, plus the furnace."

They thought it was still high. They were right. The appraisal came in under than their contract price.


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RE: Sellers Unfazed by Reality (another deal's death by appraisal

I am starting to advise my buyers not to do inspections until after the appraisal comes in, on deals where the contract price is close to the comps.


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