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Whether I was representing the buyer or seller that info I would convey to them that in the current environment it may make sense to simply redo the contracts to match the appraisal. If that 10% or so gap does not cover the seller's amount owed perhaps the seller's lender should be approached and a short sale explored...
So if you're an agent and have a house priced right and it sells, then an appraiser drives out from 2 hours away that isn't familiar with the market, you would tell your seller to just give up 10% rather than request an appraisal review?
If you were a seller you would just give up 10% without even if the appraiser is wrong?
So if you're an agent and have a house priced right and it sells, then an appraiser drives out from 2 hours away that isn't familiar with the market, you would tell your seller to just give up 10% rather than request an appraisal review?
If you were a seller you would just give up 10% without even if the appraiser is wrong?
There was a 2nd appraisal that came in at about the same as the first appraisal. Two appraisals at the same value. I think the buyer, in this case, had good reason to walk because the seller would not come down.
Consider ordering a second appraisal while at the same time attempting to re-negotiate. Its possible that the seller owes more than the appraised amount and unable to lower the price to that level.
There's not a lot of point in ordering another appraisal at least in California. I'm not sure exactly what rules govern it, but according to my broker, the LENDER orders the only appraisal that counts, not the seller or the buyer. The buyer PAYS for it, but that's it. The resultant appraisal determines what most buyers CAN pay based on what the lender will lend, and for others, it determines what they are WILLING to pay, because they are going to be upside-down for awhile even at full appraised price since the market is still DROPPING. Most buyers simply don't want to pay more than a professional expert has determined the property is worth, and you can't blame them. Never mind what you may think of the appraisal expert or experts in general, that's the way the system works. The appraiser is from a lender approved list, and the lenders have confidence in those that they've approved (that's the point of approving them, after all)...
The best the buyer might do is to find another lender who hopefully won't have the same appraiser on their approved list-- because if they do, even a new lender will use the same appraisal, as the appraisal is REGISTERED and another lender may end up pulling the exact same appraisal the previous lender ordered, and if it's fresh will use it. I'm not sure how long before these registered appraisals expire, but chances are once they do a subsequent appraisal will come in lower still in this market. And even if the buyer CAN find another lender who will order a second appraisal, prices usually come in fairly close so as much as the seller and even the buyer may want to value the house for more, you may both be stuck with what it will appraise for. And sellers-- this can happen even if you change buyers-- the new buyer may end up with a lender that will pull the same appraisal of the buyer you just told to take a walk because you didn't like the appraisal.
Don't forget, the lenders know something perhaps the rest of us don't, and that's just how many "hidden" properties are sitting on the sidelines waiting to enter the market-- properties they're holding onto so they don't crash it all at once. Even if it doesn't seem so based on the visible inventory, this "shadow" inventory continues to push the prices down as long as it exists. And that inventory is getting bigger faster than people are buying I'm afraid. We get some insight into the size of the hidden market based on the number of foreclosure filings there are in the papers. Until the shadow market has been sold off, I wouldn't expect the situation to change. And the banks can't hold onto these properties too long, as if they do they start dropping in value due to vandalism and lack of care. Check the number of REOs with pools that have turned green with algae, lawns that have turned brown, those with broken windows and grafitti sprayed on the interior walls (oh yeah, I just can't wait to buy one of those!). You can't just ignore a house and expect its value to sustain-- houses need ongoing maintenance. That fact is going to force more of these houses to be sold in "fire sales" as time goes on and the shadow inventory continues to grow...
That's also why the new 203K 'improvement' loans are happening, as so many of these REOs need work and won't pass FHA muster without it.
So as a motivated seller, the power you have is that you can promise closing faster than an REO, and that you will fix things that are wrong, and hopefully the property isn't in as bad a shape as the REOs. And that's worth paying a little more for, though the appraisal is at this point a decending ceiling from a lending point of view. But if you don't have to sell, don't waste everyone's time and money.
I too have been shopping in a market some 600 miles away-- fortunately I can stay with some friends while I'm there and don't have a strict time constraint, but I've had to pay appraisals that didn't do me any good because the sellers, though motivated, couldn't bring themselves to agree to its price. So I then watch the property stagnate in the listings week after week as they hold out for the impossible.
There was a 2nd appraisal that came in at about the same as the first appraisal. Two appraisals at the same value. I think the buyer, in this case, had good reason to walk because the seller would not come down.
I agree with you on this one HT. I would walk too if I was the buyer. I think the offer of the 3rd appraisal was very fair. The question was hypothetical for Chet based on his advice.
So if you're an agent and have a house priced right and it sells, then an appraiser drives out from 2 hours away that isn't familiar with the market, you would tell your seller to just give up 10% rather than request an appraisal review?
If you were a seller you would just give up 10% without even if the appraiser is wrong?
I think you've seen enough of my posts to knwo that right now I have seen a lot of times that were much better than current circumstances, as well having lived through some periods with MUCH higher interest rates that really made deals tough, but I have never seen a situation where the lending standard went from far to lax to ridiculously stack against buyers & sellers in SUCH a short time.
If the lenders want to have incompetent appraisers rile for bit and someone NEEDS to sell I see no alternative other than agreeing to the appraised price. For folks that can wait until sense returns, that seems prudent.
Location: Just transplanted to FL from the N GA mountains
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I couldn't dream a nightmare like this up....
Late this evening we get a call from our agent. It seems the seller has decided that she would pay for another appraisal. She has been informed that our lender won't take an appraisal from her. She keeps saying she has an appraisal from a year ago. Well... we all know how correct that is right? Anyway... according to our mtg. broker, she can submit again, request another appraisal and see what happens. We still, even after all this, would love to have the house. So... I told em to go for it. As long as it is no more cash out of my pocket.
For the person who ask about how many appraisals...
The original appraisal showed 2BR and 2 BA (House is 3BR and 3 1/2 BA) $30,000 under
The rebuttal appraisal ask for by the mtg. broker - number of BR's still not corrected, but amount came in the same. (I'm beginning to wonder if this is really due to market... or to just flat out bad appraising.) (Might add 3rd BR and 3RD BA are in basement... along with huge family room...none of which was considered sq. footage on the appraisal).
I'm also questioning this appraiser's knowledge of home building in general. In the section which give cost analysis, this guy says that it is 23.00 per sq. foot for basement space. Can you actually even pour concrete that cheap? And that 93.00 per sq. foot is right on living space. Once again... this seems ridiculously low.
We are still willing to purchase the house. We hope that the 3rd appraisal will come in. If not however, we will be walking... because no matter how you slice it... I will not pay more than appraised value. Honestly, I don't have much hope. Even if the 3rd appraisal comes in 5% above the others, the lender still won't lend enough on it.
For the person who ask about how many appraisals...
The original appraisal showed 2BR and 2 BA (House is 3BR and 3 1/2 BA) $30,000 under
The rebuttal appraisal ask for by the mtg. broker - number of BR's still not corrected, but amount came in the same. (I'm beginning to wonder if this is really due to market... or to just flat out bad appraising.) (Might add 3rd BR and 3RD BA are in basement... along with huge family room...none of which was considered sq. footage on the appraisal).
I'm also questioning this appraiser's knowledge of home building in general. In the section which give cost analysis, this guy says that it is 23.00 per sq. foot for basement space. Can you actually even pour concrete that cheap? And that 93.00 per sq. foot is right on living space. Once again... this seems ridiculously low.
.
Just for clarification ..... bedroom count does NOT necessarily affect the value. And if the house was measured according to ANSI Standards, a nationally recognized method, below grade rooms would not be included in the GLA (Gross Living Area). But much of all this depends on your market and if the basement rooms were finished in the same way as the rest of the house, I probably would have given it some value but as I said above, this depends on several factors.
The cost approach of an appraisal is done for appraising purposes only ... NOT for insurance purposes or any other purpose other than a valuation tool. The numbers you see in the cost approach are the DEPRECIATED costs based on the age of the house and the local multiplier.
Location: Just transplanted to FL from the N GA mountains
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Schousse,
The basement is considered a terrace level basement. 1/2 is at ground level, rest built back into land. Fully finished w/ hard wood floors, stone fireplace and built in's in solid Cherry cabinetry. Two large french doors which open onto patio. 1000 sq. feet total. Also large BR and full bath. I really do understand that basement's should not be counted as living space, but this really seems unrealistic to me. Should this be considered differently?
Missing a bedroom and a bath and a half in the appraisal seems like sort of a big deal to me, especially if it's finished as nicely as you say. I'm sure that the valuation of a semi-basement bedroom isn't as high as that of a "regular" bedroom, but it wouldn't rate as low as a concrete-floored basement with a chipped pool table in the corner, either; I'd think.
I also don't buy that appraisals, even 2 of them, are always accurate. I'm in the Boston area and have heard horror stories of lenders sending in appraisers from low-value mill towns hours away to evaluate homes in the toniest of Boston suburbs. Sure, they can compare some things, but they don't have the knowledge to understand that THIS street is more desirable than THAT street and this elementary school tops that one, etc...
Replacement cost and market value seldom are the same. Just because I spend $50,000 on a new pool a few years ago, does that mean that's what it's worth today? Nope. The difference between cost and value is a term called DEPRECIATION.
If the second appraisal came in at the same as the first, sounds like the appraisal wasn't "low". But they probably reflect true market value. Shopping for high appraisals is not the answer here.
Is it possible to get the seller to take a second lien (note) for the difference? If you still want to pay over the appraised market value, it looks like this might be an option.
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Come on Brandon...
