Advice needed: Appraised house value lower than sale price (Denver: sales, lender)

[Belle_w]

Hi all,

We just moved to Denver 2 months ago, made an offer on a property, went through inspection and appraisal came yesterday. It is appraised $20K lower than the agreed upon sale price, which is about $600K.

Since we are new to this area, we do not know what this means. Some have told us it's subjective and appraisals are going lower than they should. Some are saying it's fair. Some are saying inventory is low for a few months now and it's turning into a seller's market and appraisals need time to catch up.

Any advice out there? If it were you, what will you do?

The property is in Homestead in the Willows in Centennial.

Thanks in advance!

[Snikt]

Well you would be liable for the extra 20k in cash, since the bank is going to use the appraised value. 20k on a 150k house is a big deal, but 20k on 600k I would think the seller would re-negotiate?

I guess if you really want it, and can afford the extra money then it's not a huge deal, but I would try to re-negotiate the contract

[infinitylove]

I would also try to renegotiate the contract. It doesn't hurt to ask. Maybe they would be willing to meet you half way. Also, what does your contract say?

But, as Snikt said, if you want the house and the seller won't come down, you won't be able to borrow more than what the house appraised for and will be on the hook for the extra 20k.

[Santoses]

Check your contract--the standard contract language addresses if the house appraises for LESS than the agreed-upon amount. The seller must either lower the price of the house OR [something]. In other words, the ball is entirely in your court but don't delay. A realtor, your realtor, should have addressed this when the appraisal came in.

[Charlie M.]

Pretty normal for appraisals to come in low these days. It gives you a little power to negotiate a better deal or walk away if you choose. I would think the seller would work with you on the price.

[2bindenver]

From the state approved contract:

Buyer shall have the sole option and election to terminate this Contract if the Property’s valuation is less than the Purchase Price determined by an appraiser engaged on behalf of (blank). The appraisal shall be received by Buyer or Buyer’s lender on or before Appraisal Deadline (§ 3). Buyer shall have the Right to Terminate under § 25.1, on or before Appraisal Objection Deadline (§ 3), if the Property’s valuation is less than the Purchase Price and Seller’s receipt of either a copy of such appraisal or written notice from lender that confirms the Property’s valuation is less than the Purchase Price.
http://www.dora.state.co.us/real-est...CBS1-10-11.pdf

and then you'd need this http://www.dora.state.co.us/real-est...TT44-10-11.pdf

[Belle_w]

Thank you all so much. We do have the right to terminate based on our contract and will get our earnest money back. Our contract does not have the clause that the seller has to come down however.

The Appraisal objection deadline is next Wednesday. We shared the appraisal report with the seller as well. First attempt was to lower the price down to appraised value. Seller rejected. Second attempt to meet us halfway or we will walk. Seller rejected. Latest response from seller's realtor is that they are set solid and will not negotiate.

The ball is indeed in our court. Appraisal is 3% below agreed upon price. Bank told me also that's it's up to us. We do like this house, but don't want to overpay.

Charlie M, you mentioned that low appraisals are common these days. Is it because the market is picking up, and comps are still based on previous sluggish data? One independent appraisal (friend) did tell us this is a hard appraisal because there are not enough comps in that area. Our realtor did tell us also that not many people sell in Homestead comparatively.

[DenverBrian]

It's astonishing to me that the seller isn't willing to lower price to appraisal value. They are evidently betting that a) another buyer comes along - quickly - and b) the new buyer's appraisal is somehow magically more than the appraisal just completed.

[2bindenver]

I would agree, in this market where prices are rising, it's a bet many Seller's are willing to take.

[mic111]

How long are you planning to be in the house? If it is 5 or 7 years you should probably walk away. That is an extremely high price for that neighborhood. I'm sure the house is nice but it wasn't that long ago those houses were selling in the 100K-200Ks. Look on zillow.com and see what the recent sales were for the ones around it.

If your planning to be there for 20 yrs or the rest of your life and you love the house then who cares about the $20K.

Good luck with the decision.