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I was just talking to a friend of mine who is in the long process of buying a foreclosure. Escrow is about to finally close; escrow has been 120 days. the house is being purchased at 190k, its located in So Ca. in the high desert area. My friend was telling me this morning that the house was appraised at 160k; 30k less than the purchase price. He is now very concerned and is wondering if he will not get the house now. He is about to get married in a few weeks and is worried the house will fall out of escrow because of this. Does anyone have any expert advice on what he should expect to happen, will the bank most likely sell it to him at that price? This is interesting to me because we have purchased a home that is still under construction. Purchase price of our home was 173k. Is there a chance this could happen to us as well? Escrow on our home is suppose to close at the end of Sept. I appreciate any insight on this, as we are both new to all of this stuff.
Last edited by mantismom; 08-12-2008 at 11:24 AM..
To answer your question, it is always possible that a house will appraise lower than the list/purchase price.
My advise to your friend, and you, is to have your own appraisal done.
Of course, there is always the possibility of re-negotiating the contract price.
That is real simple way to resolve this. Tell the bank, Show them the apprairal and demand they reduce the price this figure, its a foreclosure!. Why would you buy a home knowing that when you signed the papers that you lost $30,000. Dollars ?????? Thats a great way to start a marriage.
I can give you expert advice cause it just happened to my buyers in the IE. What is happening out there is that Appraisers are being very conservative and they are doing something called a “market change adjustment”. He would not use any comps from even the previous three months. He said that they were too old. Anyway, ours came in about that much lower also. Now this particular area was all over the place on prices and as each month passed I can say that prices did start coming down. When dealing with REO's it can take forever to get signatures, papework back, etc.
So the listing agent presented the Appraisal to seller (REO Bank) and wanted them to do a price reduction. So myself and my buyers were ecstatic of course. The seller wanted another opinion but problem was it was a VA loan and the VA don't send out 2nd Appraisers for another opinion. And that appraisal will stay with the home for 1 yr.
So after haggling back and forth this stupid bank says we will meet the buyer half way. They wanted a deal of $17,000 over the appraisal!! Yeah right! With how many foreclosures on the market in the IE! Needless to say we moved on and found a better home for the buyers and due to close very soon. That other home is still active on the market!
So in yr friends case let's hope he is dealing with a more sensible bank as a seller. Tell him to keep looking there is still plenty of inventory out there. But unless he has to have this house I wouldn't come out of pocket to meet the seller's price.
I can't understand why your friend would want to pay more than the property is worth.
Of course he doesn't want to pay more than what the house is worth, he just wants to know what direction this will turn now that the house appraised 30k lower than sales price.
I can give you expert advice cause it just happened to my buyers in the IE. What is happening out there is that Appraisers are being very conservative and they are doing something called a
Quote:
Originally Posted by caligurltotx
“market change adjustment”. He would not use any comps from even the previous three months. He said that they were too old. Anyway, ours came in about that much lower also. Now this particular area was all over the place on prices and as each month passed I can say that prices did start coming down. When dealing with REO's it can take forever to get signatures, papework back, etc.
So the listing agent presented the Appraisal to seller (REO Bank) and wanted them to do a price reduction. So myself and my buyers were ecstatic of course. The seller wanted another opinion but problem was it was a VA loan and the VA don't send out 2nd Appraisers for another opinion. And that appraisal will stay with the home for 1 yr.
So after haggling back and forth this stupid bank says we will meet the buyer half way. They wanted a deal of $17,000 over the appraisal!! Yeah right! With how many foreclosures on the market in the IE! Needless to say we moved on and found a better home for the buyers and due to close very soon. That other home is still active on the market!
So in yr friends case let's hope he is dealing with a more sensible bank as a seller. Tell him to keep looking there is still plenty of inventory out there. But unless he has to have this house I wouldn't come out of pocket to meet the seller's price.
Thanks for your expert advice; this may very be the way he will have to turn. I know that he won’t want to fork out the additional money for the house since he will be getting married shortly. From everything I have been hearing, the banks are NOT easy to deal with. Again, thanks for your reply.
Quote:
Originally Posted by Fighter 1
That is real simple way to resolve this. Tell the bank, Show them the apprairal and demand they reduce the price this figure, its a foreclosure!. Why would you buy a home knowing that when you signed the papers that you lost $30,000. Dollars ?????? Thats a great way to start a marriage.
I agree! I am going to pass this information along to him so that he can take action and hopefully make the right decision. You are definitely right, that is no way to start a marriage. This person is a very sensible person and is trying to make sure he does everything the smart way. He is hoping the bank will adjust the sales price accordingly. I will keep you all posted.
That is real simple way to resolve this. Tell the bank, Show them the apprairal and demand they reduce the price this figure, its a foreclosure!. Why would you buy a home knowing that when you signed the papers that you lost $30,000. Dollars ?????? Thats a great way to start a marriage.
You can demand all you want, but that doesn't mean squat to the bank.
It could very well be that the reason it appraised lower is due to damage and/or deferred maintenance.
It is also not unusual for people to pay more than the asking price or appraised value. If somebody falls in love with a property they can pay whatever they want. But if they are going to mortgage the property the bank isn't going to lend more on it than what the market value is.
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