House appraised at less than purchase price (Dallas, Allen: for sale, 2013)

[nemadeni]

Hi,

We are have a 2007 Preowned Shadock home in Allen,TX under contract for 460k for 4462 sq ft home. But house appraised value based on sales comparison approach came to 434k. Appraised Value based on cost based approach is coming to 452k. Around same size Adjacent home was Windsor Home and was sold 426k recently. Seller has house appraisal from 2010, which states the appraised value at 457k.

We have disputed the appraisal, since seller is not negotiating.Any advice will be helpful.

Thanks
Niel

[FalconheadWest]

The cost based approach means nothing. Hopefully your agent has comps to turn in to show the value. It's also good to involve the listing agent as there's always a reason the house was listed where it was listed. If you're rolling in closing costs into your sales price, more than likely those will be removed.

If the seller doesn't want to negotiate, you have to figure out if you're ok with the value since the appraiser is just a third party opinion, or if you want to move on. The seller has to realize that he could lose more by waiting for the next buyer and selling for less, potentially. Many times, a meet in the middle works well.

[Bigger G]

If you really want that house then its a different matter but otherwise tell them that you are backing out. Let them make an offer to you instead of you trying to negotiate with them. No reasonable seller would want to kill the deal.

[hal2814]

Cost doesn't matter to the lender. That will matter to the insurer. A 2010 appraisal won't matter either. That was 3 years ago. As far as the lender is concerned, it's a $434k home. You can dispute which you already did. If the dispute falls through, your options are limited:
-Was appraised value a provision in your contract? If so, you could back out.
-Given the dispute failing, the house is not going to appraise for more than $434k in the near future. That will give you some leverage with the seller. They may be more willing to budge on price at that point.
-Your only other options are to bring enough cash to the closing table to cover the extra $26k or walk away.

[TurtleCreek80]

Unfortunately, the appraisers are not keeping pace with the rapid ascension of values in many of the hot DFW markets. It is compounded by having such small inventory for sale / recently sold; appraisers are having to go further back in time to be enough sales for comps and thus going back in time when values were lower.

You basically have 3 choices:
1. Negotiate with seller. This really isn't fair if the contract value reflects current market values.
2. Pay the difference at closing.
3. Walk away & terminate for inability to secure financing.

[SS 376]

I'm a little surprised to see an appraisal come in under the sale price for something other than a new build but it's certainly not unheard of. I would be prepared to walk if the seller is unwilling to negotiate. You're in the drivers' seat here because there is quite a bit out there in Allen that's very similar for less than $460k.

[Bigger G]

Exactly! Its not some prime city location with low inventory, you shouldn't have to shell out $26K.

[TurtleCreek80]

Originally Posted by SS 376

I'm a little surprised to see an appraisal come in under the sale price for something other than a new build but it's certainly not unheard of. I would be prepared to walk if the seller is unwilling to negotiate. You're in the drivers' seat here because there is quite a bit out there in Allen that's very similar for less than $460k.

I can't speak to Allen, but it is happening to a good number of pre-owned sales in sales in Dallas' in-town neighborhoods like Preston Hollow (where there is <3 mos inventory on the market and prices are +20% to LY), the Park Cities (where somewhere between 1/3-1/2 of sales are out of MLS "hip pockets" and prices are rising +1% each month), and East Dallas.

If the Allen home was on the market for less than 1 week prior to getting a contract, there were multiple back-up contracts, and/or there are recent sold comps in the neighborhood that support $460k, then the contract price is likely fair. If the home was on the market for a while and no comps support the $460k, then OP is paying too much and needs to walk.

[TurtleCreek80]

Originally Posted by Bigger G

Exactly! Its not some prime city location with low inventory, you shouldn't have to shell out $26K.

It's not a prime city location, but that doesn't change the fact that as of June 2013 ntreis data, Allen ISD had only 1.8 months of inventory supply for sale. 6 months is a "healthy" market, neither tipped towards buyers or sellers.


http://recenter.tamu.edu/mls/ntreis/table5.html

[Bigger G]

Originally Posted by TurtleCreek80

It's not a prime city location, but that doesn't change the fact that as of June 2013 ntreis data, Allen ISD had only 1.8 months of inventory supply for sale. 6 months is a "healthy" market, neither tipped towards buyers or sellers.


NTREIS MLS Area Sales Closed by Area, Ranked by Hotness for: June 2013 Single Family

If they don't find one in Allen then there are so many districts around that are similar or better than Allen ISD.