Lower appraisal

[SoFLGal]

Originally Posted by granger123

After observing the big difference between the contract price and bank's appraisal, the sellers hired their own appraiser. The new appraisal used similar comps as the bank apprisal, but the new apprised number is $65,000 more than bank appraisal (bank apprisal is $60,000 less than the contract price). The new appraisal adjusted for the all new fixing in many items: the effective year, house condition, quality of construction. For the house built in the same subdivision in Palmer ranch, they added $50,000 for the quality of construction in addition to effective year adjustment $25,000 to $50,000. I don't know how the appraiser say the contracted house's effective year is 5 years (physical year 15), but all the comps's effective years are close to physical year 15. I stronly feel the appriser did his or her own very best to boost the value of the contracted house. I couldn't believe this new appraisal. In my opinion, the second apprisal just try to match the contract price.

I am the potential buyer. I think the bank apprisal is somewhat too conservative in terms of effective year and the seller's appraisal is too inflated. What should I have to do? Should I have to hire 3rd appraiser for more accurate apprisal?

Wow, that's a though one but I know what you're saying. Here's what I would do. Give your Realtor a call and see if he/she can pull the best comps. This is the formula I use-for age, five years on either side, for example if the home was built in 2000, I'd use homes built from 1995 to 2005. Then I look at square footage. I use 20% on either side of the square footage. For example, if the home is 2000 square feet under air, I'd use home 1600 sq ft to 2400 sq ft. You should have the Realtor start 1 mile from the home looking for similar properties and then move out farther if she/he can't find any matches. Then to find homes with similar architecture features, amenities, etc.The Realtor can go back in time 3 months to find comps and if need be as far back as six months. Look at things that may have brought the price down-on a main road, a foreclosure (maybe the condition of the home was poor), etc. And look at things that may have inflated the price-a better location, better condition, etc

I would have your Realtor send you over all the properties that match this criteria so you can make the determination and see for yourself. Tell your Realtor you want every property that matches this criteria and not to leave any properties out. Then you'll be able to get a glimpse of what they are looking at. Once you get that info try to analyze each property. Look at the descriptions and the rest of the sheet and try to figure out why one sold for more or one sold for less.

Here's a little on the specifics of how the appraisers adjust properties:

Note that the sales price of the comparable are known, while the value and price of the subject are not. Therefore, adjustments can be made only to the comparable prices, not to the subject's. Adjustments are made to the comparables in the form of a value deduction or a value addition.

Adding or deducting value. If the comparable is better than the subject in some characteristic, an amount is deducted from the sale price of the comparable. This neutralizes the comparables competitive advantage in an adjustment category.

If the comparable is inferior to the subject in some characteristic, an amount is added to the price of the comparable. This adjustment equalizes the subject's competitive advantage in this area.

Adjustment criteria-The principal factors for comparison and adjustment are time of sale, location, physical characteristics, and transaction characteristics.

I thought it might help you a bit if you had a little insight as to how the appraisers come up with their data. Maybe your Realtor can sit down with you and go over this data. This exercise would just be so you can get a feel for what they are seeing.

Good luck with it

[joeyddog]

When we had the first appraisal for our Wells Fargo mortgage (we lost that house), there were fixed amounts added for water view, golf course view. Roof type, construction material (wood vs block), number of bed and bathrooms, acreage all were considered. Some comps were penalized if they were too old. In our case Wells Fargo insisted on "casting a wide net"- the appraiser had to take into account all Sarasota/Bradenton foreclosures and home depreciation instead of my development (the Meadows) which had very few foreclosures. Their "wide net" took in communities which were not comparable- the Meadows has golf courses, walking trails, bird sanctuary, own shopping village and compared it to apartment conversions with loads of foreclosures. We eventually bought another place with a more local mortgage company and lucked out with an apprasier who knew the area and was much fairer.

[naeem5]

Originally Posted by granger123

After observing the big difference between the contract price and bank's appraisal, the sellers hired their own appraiser. The new appraisal used similar comps as the bank apprisal, but the new apprised number is $65,000 more than bank appraisal (bank apprisal is $60,000 less than the contract price). The new appraisal adjusted for the all new fixing in many items: the effective year, house condition, quality of construction. For the house built in the same subdivision in Palmer ranch, they added $50,000 for the quality of construction in addition to effective year adjustment $25,000 to $50,000. I don't know how the appraiser say the contracted house's effective year is 5 years (physical year 15), but all the comps's effective years are close to physical year 15. I stronly feel the appriser did his or her own very best to boost the value of the contracted house. I couldn't believe this new appraisal. In my opinion, the second apprisal just try to match the contract price.

I am the potential buyer. I think the bank apprisal is somewhat too conservative in terms of effective year and the seller's appraisal is too inflated. What should I have to do? Should I have to hire 3rd appraiser for more accurate apprisal?

How did this end with the bank's appraisal and the seller's appraisal?

If a buyer and seller agree on price and the appraisal comes in too low, is that the end of the deal, and the buyer moves on? (and seller and buyer are devastated because the "desire to own my house was great" - mutually agreed price)

I know they can just come up with cash to make up the difference.
Is this the only option?

I've got a very interested buyer and the way they may be offering on my home could cause a possible issue when it's time for the appraisal. I think my lookers are in great shape as far as credit so a bank would have no reason to lowball the appraisal, but then again the lender and the appraiser are not related.

[granger123]

Originally Posted by naeem5

How did this end with the bank's appraisal and the seller's appraisal?

If a buyer and seller agree on price and the appraisal comes in too low, is that the end of the deal, and the buyer moves on? (and seller and buyer are devastated because the "desire to own my house was great" - mutually agreed price)

I know they can just come up with cash to make up the difference.
Is this the only option?

I've got a very interested buyer and the way they may be offering on my home could cause a possible issue when it's time for the appraisal. I think my lookers are in great shape as far as credit so a bank would have no reason to lowball the appraisal, but then again the lender and the appraiser are not related.

At first, the sellers were not willing to negotiate the price and the deal was fall apart. But after one day, the listing agent called my agent and said the sellers want to negotiate price. And we settle with the final price. The final price is $20,000 lower than the original contract price, but it's still much higher than the bank appraisal. We have to deposit quite big money to fill the gap. The current owner spend so much money during the last 3 years for renovation (say, more than $200,000) and we thought it's worthwhile to buy even though the difference between the new contract price and the bank appraisal is still huge. The bank appraisal just added $25,000 for the renovation plus a little bit effective age adjustment. In my opinion, some houses renovated excessively or added lots of fancy stuff may have bank appraisal problem like what I had.

[naeem5]

Originally Posted by granger123

At first, the sellers were not willing to negotiate the price and the deal was fall apart. But after one day, the listing agent called my agent and said the sellers want to negotiate price. And we settle with the final price. The final price is $20,000 lower than the original contract price, but it's still much higher than the bank appraisal. We have to deposit quite big money to fill the gap. The current owner spend so much money during the last 3 years for renovation (say, more than $200,000) and we thought it's worthwhile to buy even though the difference between the new contract price and the bank appraisal is still huge. The bank appraisal just added $25,000 for the renovation plus a little bit effective age adjustment. In my opinion, some houses renovated excessively or added lots of fancy stuff may have bank appraisal problem like what I had.

ok, your house is alot higher priced than the one I have for sale and it is impossible for the appraisal to be that far off from an offer as your's was. Still, for me, as the seller, to have to reduce my price 5000, 10,000, 15,000 can be a big hit to me since it's a big %. And the people looking at my house are really interested. I'm not sure, at this point, if they would have, and be able to, and want to, put up the difference to get the house they want.

[dishing the 9411]

You might want to thank that appraiser and move on to the next place. Just a thought.

[naeem5]

oh, I moved on because of the doors, and the $7000 the seller wanted "extra" to make a long list of repairs, and their repair list did not include the crack in the brick, the chimney flashing, or any of the doors.

I was surprised that an appraiser would let such a crack in the brick, go by as "cosmetic"

So, if an buyer and seller agree on a price and the appraisal comes in too low, that's the end?
unless the buyer can make up the difference in cash?