We didn't appraise for offer price (Phoenix: bank owned, sales, condo)

[musicforme]

We had our house in Far North Phoenix (85086) appraised today.

4 bedroom + office, two car garage, 3700 sq ft. We offered $295, which was the list price.

The appraisal came back at $250k based on some very recent sales in the same edition. Two of the sales were for the same model as ours.

I've e-mailed our Realtor to see what happens now. We were putting 20% down, and unsure how the process works from here.

I thought I'd start this thread for those that may experience the same thing in the near future.

[santos]

Wow. I sold my condo and the appraisal came back at less than the offer. I looked at the contract and in the fine print it said that the buyer could legally rescind the offer if the appraisal comes back less. The buyer's RE did not tell her.

[musicforme]

Originally Posted by santos

Wow. I sold my condo and the appraisal came back at less than the offer. I looked at the contract and in the fine print it said that the buyer could legally rescind the offer if the appraisal comes back less. The buyer's RE did not tell her.

I just found the PDF copy of the contract and found that we have five days from today to back out of the contract. If the seller doesn't come down to the $250k price, we don't have the cash to make up the difference. We have enough cash to put 20% down on a $295k price and refuse to may PMI on a mortgage.

My wife will be devastated if we don't get this house. It is literally next door to one of her best friends from Jr and High School. They are both now in their mid 30s and looking forward to having all our kids grow up together.

[redbean]

Originally Posted by musicforme

We had our house in Far North Phoenix (85086) appraised today.

4 bedroom + office, two car garage, 3700 sq ft. We offered $295, which was the list price.

The appraisal came back at $250k based on some very recent sales in the same edition. Two of the sales were for the same model as ours.

I've e-mailed our Realtor to see what happens now. We were putting 20% down, and unsure how the process works from here.

I thought I'd start this thread for those that may experience the same thing in the near future.

Looks like the appraiser knew his/her job, and just saved you $45,000. Use the appraisal to negotiate.

BTW, don't ever offer list price for real property. That's usually a "wish price" for the seller. Good luck and happy shopping.

[rjrcm]

If you are using the standard Arizona Association of Realtors contract, then you have 5 days after notice of appraisal result to to cancel if appraised value is less than purchase price, otherwise you waive the appraisal contingency. This assumes no modification by other addenda (such as from a bank addendum in a bank owned sale). You can negotiate with the seller as to how to deal with it. Typically you would ask to reduce the purchase price to the appraised value. If they don't agree, then deal canceled.

[SunLuver]

Originally Posted by musicforme

We had our house in Far North Phoenix (85086) appraised today.

4 bedroom + office, two car garage, 3700 sq ft. We offered $295, which was the list price.

The appraisal came back at $250k based on some very recent sales in the same edition. Two of the sales were for the same model as ours.

I've e-mailed our Realtor to see what happens now. We were putting 20% down, and unsure how the process works from here.

I thought I'd start this thread for those that may experience the same thing in the near future.

Is this an established home or a new build?
So this is a house that you want to purchase...you offered list price but appraisal came back substantially less...
If it's an established home - no issues, every bid is contingent on appraisal meaning you can back out if appraisal comes in for less than sale price.
If it's a new build - little different story but there's still that issue of "contingent on getting financing" and also if it's FHA loan, by law they cant keep your deposit nor sell you the house for offered price unless you are willing and able to put the difference cash.
Do you have a conventional loan or an FHA?
Usually builders will work with you if appraisal is substantially less than agreed sale price. In fact, some builders will make you sign an agreement that if you order more than 15% of base sale price in upgrades, you must pay cash for amount above 15%....as many times that is what causes the appraisal to come thru lower.
At this stage, I"m assuming it's a newly built home....which builder is it?

[SunLuver]

ok, while i was writing...i see a bunch of comments came thru, including your clarification of what kind of sale/purchase this was...never mind my "new build" comments.
Hopefully the sellers are willing to come down to appraised value...otherwise it's up to you to decide if you want to come up from appraised value (i.e. how worth it is it to you to have that SPECIFIC house due to the whole "best friends live next door" issue). Maybe seller wont sell at appraised value but they're willing to come down from their asking at least half way (or more).
But at least you have 5 days to figure it out according to contract....

[musicforme]

Originally Posted by redbean

Looks like the appraiser knew his/her job, and just saved you $45,000. Use the appraisal to negotiate.

BTW, don't ever offer list price for real property. That's usually a "wish price" for the seller. Good luck and happy shopping.

Normally, I would agree with you about offering list price for a house. In our case, we had offered above list price on three previous houses and lost out on them due to cash offers from investors. Those houses were listed anywhere from $250k to $285k. Since this house was literally at the top of our budget, we offered the $295k.

Considering what houses of this size cost back where we're from in the DFW area, it was still a good deal to us. Houses of this size would go for close to $400k even in today's market.

Originally Posted by SunLuver

ok, while i was writing...i see a bunch of comments came thru, including your clarification of what kind of sale/purchase this was...never mind my "new build" comments.
Hopefully the sellers are willing to come down to appraised value...otherwise it's up to you to decide if you want to come up from appraised value (i.e. how worth it is it to you to have that SPECIFIC house due to the whole "best friends live next door" issue). Maybe seller wont sell at appraised value but they're willing to come down from their asking at least half way (or more).
But at least you have 5 days to figure it out according to contract....

The seller in this case is an investor how paid around $182k for it earlier this year (based on my Google searched). From what we've learned from my wife's friend, the house was pretty trashed when he bought it and fixed it up really well (tile in about 90% of the first floor, granite counter tops in the kitchen and the two masterbaths (that isn't a typo).

[sh9730]

Redbean,

In normal circumstances I might agree with the comment that the appraiser "just saved you 45K", BUT if you search the net for "HVCC" you will see their are some real problems with this new appraisal system in use. As a matter of fact it is hard to find many GOOD comments about it! (There are a few, just far between the MANY bad ones). The situation the OP finds themselves in is becoming all to common and (according to those that have experienced the problem - Im not one of those) much of the time the problem is due to inexperienced, or even non-local appraisers, some of which dont even have access to the local MLS for comps!

Not saying this particular appraisal falls into the "bad" category, but there are threads all over the internet about this new system failing buyers, sellers AND banks.

[Captain Bill]

What you're seeing is the result of a market price turn around. Sale prices have been increasing in the under $350k range during the last couple of months.

The comps that the appraiser is using may be 3 months old, (which isn't old at all) but hitting right at the bottom of the market in this price range.

So the appraisal comps haven't caught up to what the pending sales are doing today.

If the listing realtor is on top of what's happening in the market, then I would expect him/her to advise the seller to hold tight on the price. You may request an addendum to request the seller to extend the deadline to a date that will allow you to ask the bank to get a new appraisal (at your expense of course.)

In this case, you will either have to come up with the difference in what the lender will finance, or hope to get the appraisal amount increased.