Foreclousures in my neighborhood, house under contract, how will apprasial work? (Bolingbrook: bank owned, short sales)

[LMG1]

My home in Bolingbrook just went under contract. We agreed on a selling price of 186K with the buyers. However, there are several bank owned homes that have sold in our neighborhood over the past 12 months. The same model 3 doors down was bank owned and sold for 158K. There are a few other homes that were bank owned that sold for anywhere between 150-170K We are thinking the apprasial is going to come in low due to the neighborhood foreclosures.....what do you all think?

The last non-bank owned or short sale transaction just occurred in August and that home sold for 175K and it has 300sq feet more than hour house! Prior to that the last regular sale was last OCT for 195K

[Gunner0325]

Hmmm not to scare you but we a similar situation happen with our condo in the city. Our appraisel came in 5K less then what the contract was for, so we had to lower our price 5K or else the bank wouldn't loan the buyer the money. We were already at our lowest sell point too but if wanted to sell we had to drop 5K. Hopefully your situation turns out better and you do not have to drop your price! Our buyer was getting an FHA loan so that might have been the case...not sure if it's the same for standard loans

[knitgirl]

Yep, appraisers look at all the sales in the neighborhood. It's hard to justify a $186,000 value when the same model just sold for $158,000. If that place was a mess, there could be condition adjustments. The other property selling for $175,000 and it's larger is not a good sign. That $195,000 sale won't come into it at all. It's too old even at the best of times. Now they are really focused on the last few months.

[TempesT68]

Bolingbrook is one of the hardest hit cities with foreclosures. I agree with above I think the appraisal will come in quite a bit lower than the agreed price just because of the sheer number of bank owned properties.

[Coddie]

That just happened to my in-laws.....a bunch of forclosures went through and their house appraised for $30,000 less than the agreed upon amount. Needless to say, the sale didn't go through.

[sunnyandcloudydays]

This seems to be a real problem no matter where you live.
As the appraisers are really conservative these days.

I have yet to find any way around this besides throwing down a lot of money and covering the difference , which most of us cant afford to do.




This same reason is why short sales are becoming more common.
The downside of a short sale,your credit rating will take a big hit.

[infoseeker111]

I am on the buy side now. I know someone who was in a similar situation when the appraisal came lower and they got that lower price.

Couple of questions:

1) When does appraisal happen? Is it part of the mortgage process?

2) If I look at the county's apprised value of homes for property tax purposes, those numbers are 1/3 rd or so of the market value. Is that the same appraisal that we are talking about here?

[sunnyandcloudydays]

Originally Posted by infoseeker111

I am on the buy side now. I know someone who was in a similar situation when the appraisal came lower and they got that lower price.

Couple of questions:

1) When does appraisal happen? Is it part of the mortgage process?

2) If I look at the county's apprised value of homes for property tax purposes, those numbers are 1/3 rd or so of the market value. Is that the same appraisal that we are talking about here?

The appraisal is ordered either by the bank or the banker. It is one of the most single important pieces of buying a home.

the accessed value should be in the appraisal and it has nothing to do with an appraisal by an appraisal company

the appraisal looks at comps (homes that have recentley sold in a close proximity to the house.) Usually within a short time frame .

the appraiser adjusts up or down on the differences.
Example House a. sold for 300k similar to the subject property but comp a did not have updated flooring , in this case the appraiser would adjust for the flooring and give more value.
same applys for bedroom , bathrooms etc.

the appraiser usually comments on a bank held property or mentions it was a distressed sale.

An appraisal is ordered thru a banker or broker thru a clearing house- this is done to deter any favoritism and is supposed to provide the seller and buyer a non biased opinion of an actual market value.

a bank since they are federally charted has the ability to choose the appraisal company.

IMHO if you have the ability to choose an appraiser - you would tend to get a more accurate appraisal.

One thing to keep an mind an appraisal is just an opinion of market value as it can change from who is actually doing the report.

[infoseeker111]

Thanks very much for clarifying the differences between apprised value and assessed value. I realize now I am mixing the two up.

A few more questions:

1) If I am paying cash, the step of the bank asking for the apprisal does not exist, right? So in that case, I need to hire an apprising company. I would not even know where to go for that? Are there reputable big companies in that space? How much does it cost?

2) In the mortgage scenario where the bank orders the apprisal, who pays for that? Is that all part of the total cost of getting a mortgage?

3) I assume, in either case, I will put a clause in the offer that it is subject to apprisal value coming in equal to higher than the agreed up on price.. Is there any standard language for that?

Thanks.

[yousah]

I am a full time appraiser who also happens to maintain a real estate broker's license.

If you are buying with cash then an appraisal is optional, but highly recommended. The cost will be a very small part of your overall price of your house and probably the best money spent.

If you secure financing then the lender will order the appraisal on your behalf. It is illegal for them to allow you to have any influence in that process and they'll include the appraisal fee (likely with an outrageously high added surcharge) as part of your closing costs. You can always buy a house with a sales price above the appraised value if you supply your own cash, but why would you overpay?

The appraisal clause that you are talking about is a very common clause found in most sales contracts used by professionals. If buying by cash then make sure that you include such a clause. Using an attorney is highly recommended.