Appraisals for short sales (RE market, foreclosed, accepting, housing)
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Took forever to get it, and then got the idea that the gal doing it didn't have much experience at it. We've been calling our lender to ask whether it was completed, and at the last call we were told that the realtor was having trouble finding comps. I forget the other question she asked, but was left with the feeling--ut-oh.
FF to today. we found out she appraised it right at our offer price. The assessments are in from the town and these numbers and the appraisers numbers are about 400k off from each other. We're in an area not really hit by the housing crisis--D.C. metro. We thought the appraisal would come in much higher.
Any implications to her appraisal price? Is this really not a big deal?
As long as I have this straight, you are the seller of the short sale....and this is your lender's person that came in with the value lower than you expected? If so, a low "appraisal" (if it was truely a Realtor that did the value judgement it is not an appraisal but a BPO, subtle difference but a difference) actually helps you. The lower your price the higher your chances of finding a buyer, and the lower the value the bank thinks your home is worth the higher the chance of the bank accepting that lower price.
An appraisal represents a range of value. If, after looking at the market, I determine that the value should be somewhere between $235,000 and $260,000 and the contract price is $250,000, then, using the contract price as indicative of the market, I might very well bring the appraisal in at $250,000. If, on the other hand, we have the same range of values and the contract price is $265,000 my appraisal will be low. If the contract price is $235,000 my appraisal might very well be high.
Not having good comparables is common if you are not in a neighborhood where sales occur regularly. If you have to go outside the neighborhood, substantial investigation must occur to ensure the adjustments are market related, the market responds to the same amenities in the same way, and attributes are truly comparable. If you are in a market that has lots of sales, lots of listings, and the neighborhood consists of similar houses on similar lots built at about the same time (the principle is homogeneity) and they are having a problem finding comparables, then there is a good chance some shenanigans are going on.
As buyers, all you care about is that it appraised. Many appraisers will appraise only at contract price if there is a huge difference in value because they don't want to submit an appraisal that will immediately raise up red flags.
You said there was a $400k difference. Say you're under contract for $400k but you think value is $800k. If the appraiser turns in an appraisal for the $800k, the lender's immediate thought is "distressed property". Qualifications for distressed properties are different than a "regular" loan. If they think it's distressed, they then have to see if you have enough reserves to get it up to par or will you be foreclosed on because you can't afford to repair it, even if you don't think it needs repairs.
The process and approval of the loan can be greatly effected, even if the $800k is a "true" number.
Just let it go as it doesn't effect your down payment or closing costs any.
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