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I'm interested in a house that is in the $200-$250k range. I can't find any other houses that meet my requirements (and are in my price range).
The Seller had already received a bid and I bid higher, and got the contract for $4k less than their asking price.
I'm now about 3 weeks away from the Closing and packing--and I have an agreement with the Buyer of my house that he will move in within 3 days of Closing.
Well, the appraisal was just completed on the house I'm buying and the Appraiser has valued the house at $6k less than what I've offered for it. He didn't actually go to the house to get his appraisal. So I have my lender disputing the appraisal and making him go physically to the house to look at it. My agent said that with the newer industry rules, appraisers are tending to appraise much more conservatively (but can that be translated as: appraising too low?).
And the Seller will not budge on the price despite the appraisal report. I'm continuing to try to push back with the Seller, but I have to move somewhere in the next few weeks (and I don't want to move 2x) and I haven't found any houses that have these features that I want.
Is it ALWAYS stupid to pay more for a house than it's worth or are there sometimes when it's justified?
I'm doing a large down payment and I'd like to live there for at least 10 years probably - but I don't want to get ripped off either.
We are talking about a maximum 3% difference here, assuming the price you agreed upon is $200K. Chances are, any two appraisals will reflect at least this much variance. I am thinking an on site appraisal is going to hit the number.
If not, you have the option of walking away, assuming you have an appraisal/financing contigency, within your contract. If the sellers are moving out, they will be as inconvenienced as your are, by this mess...
Are they willing to let you walk for a rather insigificant amount and perhaps risk over wintering?
hmm... well, that doesn't sound quite as bad then. So I might not be paying that much over the price. That's reassuring. And yes, I think the Seller is very deep into their buying process too... so it probably would be a major inconvenience for them to back out right now too. Thanks.
Appraisals don't always reflect nuances that one home may have that another won't, especially "drive by" appraisals. Square footage alone can't reflect an efficient design or one that's just a waste of space. Likewise, the comps used in the report may or may not reflect it's condition, for better or worse.
As an example, one of the comps used on my purchase was a short sale listing. Outside didn't look horrible and could justify the asking price, but inside, one would find major cracks in the drywall suggesting foundation issues, mold in multiple areas, and in the case of the garage, an open skylight courtesy of the upstairs balcony with a busted floor.
Although some may say it's not wise to "overpay", but in the long term, what's a few thousand more if indeed it's the right place? You have a deadline, the sellers have a deadline ... see if they'll take $3k off, splitting the difference. The worst they can say is no.
If the seller CAN'T sell for less because he doesn't have the money to bring then obviously it is a decision you must make as to whether or not the home is worth that much to you (obviously it is or you wouldn't have made the offer you made.) On the other hand, if you are financing an amount that exceeds what the bank is willing to lend based on the appraisal your hands are tied if the appraiser doesn't budge.
If the seller is just being stubborn and your financing allows for some flexibility offer to split it. If the seller still won't budge obviously it is your call. What the seller needs to understand is that if it didn't appraise for you, it's not going to appraise for the next guy either. Personally, if it were me and this is THE house I want, I'd begrudgingly pay it because I plan on staying in my next home for a long while.
There are many sellers right now who are not happy campers (understandibly) but this isn't your fault and they need to come to grips with the market.
I had a similar situation when I bought a house in 2006 - there was a bit of a bidding war, and I wound offering the price the house had originally been listed for (there was a price drop the day before I made my offer). It was a little gamble on my part because I had a feeling that the house wouldn't appraise - and it didn't. The comps were pretty clear, and the house shouldn't have been listed that high to begin with. Anyhow, I came up a little, the sellers came down the rest of the way and the deal went through. I would have walked away though if they hadn't budged. Anyhow I'd wait to see what the 2nd appraisal is and go from there - if it comes in at the same amount I personally would insist on splitting the difference or I'd walk. I think that's more than reasonable, since it sounds like you can make up the difference out of pocket and you really do want the house.
Well, the appraisal was just completed on the house I'm buying and the Appraiser has valued the house at $6k less than what I've offered for it. He didn't actually go to the house to get his appraisal. So I have my lender disputing the appraisal and making him go physically to the house to look at it.
My bet is that your lender ordered a 2055 instead of a 1004 (the difference being that a 2055 does everything a 1004 does EXCEPT with a 2055-also known as a "drive by"- the appraiser does not measure the house nor does an interior inspection). So this is not a matter of the lender "making" the appraiser go inside, but rather the lender ordering a 1004.
Quote:
My agent said that with the newer industry rules, appraisers are tending to appraise much more conservatively (but can that be translated as: appraising too low?).
There are no new appraisal rules. There are new rules pertaining to the ordering of appraisals, not to appraisals themselves. The old rule of being objective when appraising still stands. Under valuing a property is just as bad (and illegal) as over valuing a property.
Perhaps the Subject was just over priced to begin with or, as MAM said, 3% is not much of a variance.
If you are putting down a large amount, then the bank's loan approval shouldn't be tied to the 80% of value estimate so the loan should still be ok for them? as far as overpaying for a property, nowadays, anything bought today will be worth less next month so you pretty much have to look long term if your thinking about your investment. If you like the house and are going to live there a long time and your budget allows for it, then I dont see a problem with overpaying, especially in the amount you're talking about. if the appraisal had been 20k less , then I would understand if it might bother you.
Thanks everyone for the great feedback! And yes, I'm planning to put down a large downpayment and I hope to live there for a long time. So, I'm going to try to push the seller and see if they'll come down, but if not, I'll feeling more certain now that I'm going to go ahead and buy the property.
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