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... I offered about 25 - 30k more than it probably would have appraised for. It was worth it to me as I'd planned to live there a long time. House is still for sale 2+ years and counting. Boy I'm glad I didn't get it.......the one I end up buying is a lot nicer and cost less too
I'm certainly not intersted in "overpaying" to that degree. I definitely don't think of my home as an investment vehicle, but I also don't want to lose my shirt when I go to resell it. I'm hoping that an appraisal will give me some reasonable measure of its value.
Its not like the appraisal is some kind of exact science. We have had threads on here where multiple appraisals on the same house have come back with significant differences. And I imagine the more unique the property is the greater the differences might be.
We are putting down 20% so we will definitely have enough mortgage to afford the house. The question is what do we do if the appraisal comes in at 20k less than what we offered? I suppose that is the time to try to renogotiate. Can the seller then go back to the other bidder? Its difficult to know what the home is really worth based on comps because the home is unique with its views, etc. There are similar sized homes down the street that have sold for less, but they offer no view.
What you can do depends on what your contract says. Most contracts allow the buyer to cancel if it appraises less than purchase price. Usually, the buyer will try to negotiate with the seller to lower the price to the appraised value. The seller can't go back to the other bidder until the current contract is canceled.
..... And I imagine the more unique the property is the greater the differences might be.
That is exactly our "problem".
Quote:
Originally Posted by rjrcm
What you can do depends on what your contract says. Most contracts allow the buyer to cancel if it appraises less than purchase price. Usually, the buyer will try to negotiate with the seller to lower the price to the appraised value. The seller can't go back to the other bidder until the current contract is canceled.
Yes, that is in our contract. Thanks for the clarification on the second point.
We are putting down 20% so we will definitely have enough mortgage to afford the house. The question is what do we do if the appraisal comes in at 20k less than what we offered? I suppose that is the time to try to renogotiate. Can the seller then go back to the other bidder? Its difficult to know what the home is really worth based on comps because the home is unique with its views, etc. There are similar sized homes down the street that have sold for less, but they offer no view.
We had this issue. Our home's first appraisal was less than the purchase price. We were putting 20% down also. The problem is, you have to bring additional money to closing to meet the 20% LTV (loan to value) to avoid PMI. Otherwise even though you are putting 20% down of the purchase price, you would still have to pay PMI.
So in the case of a low appraisal, your loan amount can be no more than 80% of the appraised value of the home if you want to avoid PMI.
That seems like a waste of money to me - you'd only have to pay for a 2nd appraisal because your bank wouldn't use the first one.
Why not ask your mortgage provider which appraisal service they use? Hire them to do the pre-sale appraisal. If you're serious about the house, it's an expense you'll pay anyway.
It will save you from overpaying and provide some strong negotiating power if the sellers push back.
I had a customer put in a offer and she and her agent were very, very certain the appraisal would come in low. Well, it was a shortsale........the contract was written in January.......the bank gave the go ahead in April and the appraisal came in 15K above.....in those 120 days, there were some "regular" sales and not the foreclosure sales they based their opinion on. She paid almost 25K over her budget pirce.
My primary reason why you never use the appraisal to amend your purchase price is what happened to this customer. The appraiser can go to the neighboring neighborhood and hit the sales price and with HVCC, no one is going to call the appraiser and say he came in too high. LOL, far from it. They may question him/her on their adjustments....but if the comps appear close by and aren't drastically different, the appraiser very well could pass by a lower sales price.......what are you going to do? Call the lender and say the value should have come in less than your offer? That will get some chuckles. HVCC makes sure the lender does not manipulate the appraisal.
Negotiate a price that both you and the sellers can live with. If the appraiser agrees, then the bank agrees, and everyone is happy. Remember, in this market, appraisers and lenders are VERY conservative.
If the appraisal comes in low, then you can (if you have it) cough up more cash, or the sellers can (if they can afford to) lower the price, or you can each chip in enough to make it work. If none of those three options are palatable, then you will get your money back and start your search over.
Personally, I would not lose a desired home for a few thousand dollars. There are some good reasons why you went to contract on this one. You want to live there?
it always boggles my mind how some people think a $400 appraisal means their investment is "sound". Does he use his psychic powers to predict future market activity?
No. Those of us who are professional appraisers use our education, experience and training to do that.
My primary reason why you never use the appraisal to amend your purchase price is what happened to this customer. The appraiser can go to the neighboring neighborhood and hit the sales price and with HVCC, no one is going to call the appraiser and say he came in too high. LOL, far from it. They may question him/her on their adjustments....but if the comps appear close by and aren't drastically different, the appraiser very well could pass by a lower sales price.......what are you going to do? Call the lender and say the value should have come in less than your offer? That will get some chuckles. HVCC makes sure the lender does not manipulate the appraisal.
Moderator cut: personal attack
"Hitting the sales price" is illegal and any appraiser caught doing that should lose his/her license.
As far as the HVCC is concerned .... that is probably the worst thing that could have ever happened to borrowers. Lenders can't manipulate the appraisal? You know how many lenders own their own AMC?
Last edited by Marka; 07-05-2010 at 04:56 PM..
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