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Currently in the process of purchasing a house. Long story short, I was playing two lenders off each other and Lender A processed a request to have an appraisal done without my consent. I wound up contracting with Lender B for better rates. Lender A is a well known bank and Lender B is an online lender.
Lender B came back with their appraisal last week and it was exactly the sales price. Consequently, Lender A still sent an appraisal report via mail and it came back $30K less than Lender A's appraisal at the end of the week.
I'm now worried that we are way overpaying for the house. Since Lender B is our contracted lender and the appraisal met the sales price, there is no risk of our loan falling through.
My Real Estate agent said that we have no leverage in this situation since the low appraisal did not come from our Lender. I know we agreed to the value that the house was appraised for, but I just don't want to be underwater in value to start off with.
Do we have any recourse except to present the information to the Seller and hope they are nice and reduce the value of the home?
This is taking place in Phoenix.
Last edited by Tnythatigr; 08-10-2019 at 01:10 PM..
Reason: Add location
Why would they be nice and reduce the value of the home? They have both you and your a valid appraisal, at value. That's not a fair request.
More fair would be for you to pay for another one to split the difference before asking the seller to pay $30K on a he said/she said. For all you know, the low value is the wrong one. There is just as much chance. More chance, actually.
Appraisals are always going to be opinion. If you have access to both... the whole report, not just the values. Can you see the differences in the valuations and comps they used? Maybe one will stick out as more or less reasonable and accurate. If you really want to enlist a good discussion, upload them.... the whole reports. I always find them interesting, and it would be educational to look at two of the same property that came to such different results.
For proper perspective, what's the total value of the home? Hard to know if this is 10% or 1% of the value.
The net adjustments to the comps for Lender B are between 4 and 10 percent. For Lender A, comp adjustments are between 0 and 6 percent. This makes me think the appraiser for Lender A thought there comps were closer than Lender B. Lender A's comps do appear to be closer in square footage and lot size than Lender B's.
I don't think its unreasonable to request either another appraisal or splitting the difference in the two appraisals. Understanding that there is some variability in analysis, but $30k seems like a large gap. Has anyone encountered this type of scenario before?
You can request all the appraisals that you want, but you will have to pay for them. The bank will not pay for them. The seller will not pay for them. And the seller doesn't have to lower the price. You ultimately will probably have to decide whether you want the house for that price.
Honestly, IMHO if it's a 5% difference in price, I think good people might be able to disagree that much. That's what makes Real Estate valuation such an art. Each home is unique, and each value, somewhat subjective. You and the bank have the right to ask for an independent 3rd party evaluation of what you have decided a fair price is. You got that. You don't have the right to keep going until you find the lowest valuation, or the number you want to hear, unfortunately
I wouldn’t worry about being underwater. If you buy in an up market, you’ll be underwater when it goes back down anyway, if you don’t have a big enough down payment. You, your agent, the seller, and the LA all thought it was a fair price before you saw this other appraisal. I really would not stress about it. It’ll all even itself out in a few years, usually.
OP, I would go ahead and order the 3rd appraisal in your situation. It will either ease or confirm your fears somewhat. If you are not comfortable, especially if the third appraisal again comes in lower than just walk away. But I would first at least ask the seller if they are willing to come down and split the difference or to whatever level you feel comfortable paying. All they can do is say no.
And think of it from the sellers perspective. Do they want to not budge at all and run the risk of losing an already qualified buyer that they are in he escrow process with already? If they lose you as a buyer they run the risk of not finding a new buyer in time or even if they find one they know the possibility of a low appraisal from the next buyers could lower the purchase price $30K. They might find it more attractive to knock 10 or 15K to not have to restart the entire process again only to again get a buyer with another low appraisal.
An appraisal is an opinion of value. You will not get any seller to agree to split the difference on a third appraisal.
Let it go.
Easy to say when we have no financial stake.
Impossible to know the sellers motivation to sell or how quickly they need to sell. Do they have the time and patience to find another buyer only to possibly have to deal with another low appraisal?
I wouldn’t worry about being underwater. If you buy in an up market, you’ll be underwater when it goes back down anyway, if you don’t have a big enough down payment. You, your agent, the seller, and the LA all thought it was a fair price before you saw this other appraisal. I really would not stress about it. It’ll all even itself out in a few years, usually.
I agree with this too. 5% certainly is not as bad as 8 or 10%. Comes down to how great of a house it is for the OP and what they are looking for. And also some people just deal with financial stress in different ways.
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