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We are trying to close on our first home but the appraisal keeps coming in about $8,000 lower than the purchase price. The builder is not budging stating that our upgrades is what the difference is.
What options do we have? Why would we pay more than what the house is valued at? If we come up with the cash, we basically wipe out our savings, plus we don't feel comfortable paying more than what the house is worth. Our amount due at close jumped from about $6,000 to $12,000 now.
Did the appraisal consider the upgrades? Are there any better comparable sales that the appraiser didn't consider in their appraisal report? Unless there was a material fact omitted from the appraisal report, or a better comparable that wasn't considered, it will be unlikely you'll be able to get the value changed on the appraisal.
So if there wasn't anything material facts omitted, or better comparables not consider, then since the seller isn't going to budge, you have two choices, pay the difference or cancel the contract and look for a new home.
You asked "Why would we pay more than what the house is valued at?", and the answer to that is that you would pay more than what the home is valued at if you still thought the home was worth the agreed upon sales price to you. The appraisal is just telling the lender what the home is worth based on recent comparable sales, it doesn't mean that it's not worth more to you. Plenty of people chose to put in the difference to make this situation work, and plenty of people chose to back out of it and find a different home. Looking at your situation, since it'd wipe out your savings, and you don't feel comfortable buying a home more than the appraised value, the right decision for you may be just to find a different home. If you balk at buying it, the builder may come back and lower the price to the appraised value, or meet you halfway, etc. Buying a home is always a negotiation and often times homes are priced higher than they will appraise for, it's unfortunate, but it does end up happening.
Thank you for your input. The builder offered up new comparables from 2010 vs. the Sept/Oct 2009 comparables the appraiser listed. These were dismissed due the fact that they were never MLS listed. The only thing that appears incorrect on the appraisal document is that the contract price was outdate and we had a new contract signed and approved. I'm waiting to hear back from the bank. According to our attorney, the builder has no plans to come down on the price, so that won't be an option. Thank you for all the good info!
You can either buy it but would have to pay the $8000 difference plus any downpayment or you can walk. I would think the builder wont budge knowing that if you walk you will lose out on the tax credit...just my opinion.
On a side note, regardless of what the appraiser says this home is worth, the true value of any item is what someone else is willing to pay for it.
This is standard in the mid-Atlantic. The builders are use to buyers putting too much fluff in (meaning no additional square footage), so their contracts actually cover the fact the options are in addition to the contract price. People can go nuts and I am not saying that is the case here. I've seen kitchen appliances alone cost 8K in upgrades. Upgrades don't always add dollar for dollar value.
Now, if you added a sun room or other bonus room, there would be no problem. But it was in buyer option items. What options did you add?
We are trying to close on our first home but the appraisal keeps coming in about $8,000 lower than the purchase price. The builder is not budging stating that our upgrades is what the difference is.
What options do we have? Why would we pay more than what the house is valued at? If we come up with the cash, we basically wipe out our savings, plus we don't feel comfortable paying more than what the house is worth. Our amount due at close jumped from about $6,000 to $12,000 now.
---our upgrades is what the difference is---
You answered your own question.
Some upgrades increase a house's value dollar for dollar
Many don't.
Our upgrades included
-kitchen cabinets (better quality) roughly $3,000.
-Upgraded master bath to soaker tub $750
-Upgarded some door knobs, deadbolt on front door, sidelights. I recieved a credit for not using their dishwasher and no mirrors in bathrooms, so this was a wash
-Went $315 over our lighting budget
-$650 for electrical work (recessed lights in kitchen and ceiling fan installation in bedroom)
-$1000 to change our wall to the basement into a halfwall and finish basement stairs
-Over architecutre allowance by $650
-Survey's not included in original price $850
-Paid to have great room and kitchen painted
A total of around $7500. We didn't do anything crazy nor did we make major upgrades...we have vinyl floors and standard carpet.
We are going back to the appraiser one more time to view comparables and up-date purchase price on appraisal doc. Apparently the appraiser had our contract price without any upgrades. The upgrades were sent to bank before final purchase. I received a committment letter for purchase price PLUS upgrades.
But what you added, only added value to you. I know that doesn't help, but from the appraiser's (and the city assesor's) POV, there is nothing there to add $7500 (That's probably close what they add for a 1/2 bath). Maybe the builder can persuade the appraiser, but since the appraisal laws changed, fewer builders have influence over appraisers any more. And the appraisals are being reviewed with a tough eye. If the builder can provide full comp information to the appraiser, what the upgrades were on the comp grid, maybe. The problem with that is they actually have separate contractors handle that outside of the sale. So, the data is very rough.
I hope you get what you are lookng for, but if you were my customer, I would be telling you to be prepared for the appraisal value to stand.
A survey shouldn't be part of the price but a seperate closing cost.
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