Backing out or buying the house? (loan, how much, attorney) - San Francisco - Oakland - California (CA) - Page 2 - City-Data Forum

wave9x · 03-13-2013, 09:58 PM

I agree with others, who cares what the appraisal is if you still have enough down payment? If you think the house is worth it, then get it. You probably know better than the appraiser what it is worth given you have been in the market for so long.

aslowdodge · 03-13-2013, 11:07 PM

I might be wrong but if the appraisal is $90K under the market price, the lender will not do a loan at the 80% of the sale price, but rather 80% of the appraised price. The net result is that the down payment will need to be increased $90k more to make up for it unless the seller drops the price $90k
I know on a sale I just had, the appraisal came in $100K under the contract price and the only way it would go through would be for the buyer to make up the $100k. The lender loans against the appraised value, not the contract price. By the same token I had a few purchases not go thru because the appraisals were low and the bank would not make the loans with the contract prices.

ambient · 03-13-2013, 11:10 PM

I'm sorry you're in such a tough situation. I just recently bought in this same market, so I know how rough it is and how easy it is to get carried away. We did a last-minute bid on an expensive house in San Carlos - and won... and ended up walking out on the deal because we just felt like we were biting off more than we could chew (were lucky enough to be able to get property contingency). Those were a tough few days.

It is very difficult to make a call based on what the home value will be and where the market will go. You just don't have the information. There will be a correction at some point, but will it be three, five, ten years? Who knows... And it is true that townhome values are more volatily, but if it's in a desirable area, it will probably do alright over time.

I would just ask myself if I'm happy enough living there for 5-10 years...and if not, are you ok with the worst-case scenario of renting at market rates for multiple years until the next downturn. And only if that is a yes would I then ask myself if it is reasonably affordable. If the answer there is a yes, then you are set to go.

Here on the peninsula, most people are not buying their dream homes - that much is obvious when you clomp around an old 1500 square foot house with 30 other couples, looking at a list price of $950K, knowing that it will sell for well over $1M to someone with no contingencies. It's a matter for many of finding what you can live with. Sad but true...to get what you love, you really have to be a multi-millionaire or just very lucky.

DocGoldstein · 03-13-2013, 11:18 PM

The appraiser is saving you from getting screwed. $100,000 difference in opinion? I would jump out immediately. Let some other sucker take the hit and just rent.

dragontales · 03-13-2013, 11:39 PM

Sorry I couldn't tell if you meant to say you did or did not put in a loan contingency. But if you did I have a possible solution for you. This idea is borderline unethical, but not illegal. Use your own judgement and decide for yourself. One way to get yourself denied of a loan is to put in a large purchase on your credit card (I would say maybe $5k-10k) while your loan is at underwriting. The lender will reject your loan. You are out of your purchase contract. I don't necessarily condone this. Good luck to you.

DocGoldstein · 03-13-2013, 11:44 PM

Quote:

Originally Posted by dragontales

Sorry I couldn't tell if you meant to say you did or did not put in a loan contingency. But if you did I have a possible solution for you. This idea is borderline unethical, but not illegal. Use your own judgement and decide for yourself. One way to get yourself denied of a loan is to put in a large purchase on your credit card (I would say maybe $5k-10k) while your loan is at underwriting. The lender will reject your loan. You are out of your purchase contract. I don't necessarily condone this. Good luck to you.

Brilliant idea.

beb0p · 03-14-2013, 03:44 AM

Don't based your decision to walk away on one appraisal. If it makes your decision easier, get a second appraisal. It'll cost a few hundred bucks but could be worth it considering the amount of money at stake.

I have had enough appraisals done to know that some appraisers are complete idiots. Let me tell you a true story - I tried to refinance a property that was appraised at $970k by the lender's appraiser. When I saw the appraisal I couldn't help but chuckle. The price is at least $200K below but whatever, I had enough downpayment that it shouldn't matter. However the lock rate expired and the lender became very difficult so my broker found another lender for me. This time, just one month and half after the first appraisal, the second appraisal came in at $1.25M. My broker was amused. I told him never to use the first appraiser again.

Two different appraiser, six weeks apart, difference of $250k+. You tell me, how could anybody trusts these appraisers?

I have seen far too many sloppy appraisals done by merely pulling up similar properties without regard to the details. The first appraisal came in so much lower than market because the appraiser included a couple of distressed properties - the first one is a fixer multi-units all occupied by rent-controlled protected tenants six blocks away in a much shadier part of the city. The second is a REO where the previous owner was half-way into a gutted remodel (without the proper permits) so the house is basically bare with no walls, appliances, and God knows what else.

So my advice is to do your own comps. Don't trust the appraiser, don't trust your agent, go to redfin.com and pull up the most recent sales and compare/cross compare until you truly know what the value of the house that you're buying should be.

nmnita · 03-14-2013, 04:33 AM

As a X realtor in Ca, I would not go through with the deal unless you really do, absolutely love the hourse and it sounds like you do not. Get a real estate attorney and see what you can do. Yes, property values can continue to increase and probably will, but $100,000 approx is a heck of a lot of money and tech that is what you would be losing right off the bat. I totally dissagree when people say, appraisal means nothing. Buying a home, regardless as to the reason, is the biggest investment you migh ever make.

DocGoldstein · 03-14-2013, 09:01 AM

It's actually more than $100,000 given he automatically eats 5-6% of realtor commissions when he has to resale.

llowllevellowll · 03-14-2013, 09:37 AM

Quote:

Originally Posted by nmnita

As a X realtor in Ca, I would not go through with the deal unless you really do, absolutely love the hourse and it sounds like you do not. Get a real estate attorney and see what you can do. Yes, property values can continue to increase and probably will, but $100,000 approx is a heck of a lot of money and tech that is what you would be losing right off the bat. I totally dissagree when people say, appraisal means nothing. Buying a home, regardless as to the reason, is the biggest investment you migh ever make.

I don't think anyone is saying that appraisals mean nothing, but they are indicating that it's important to do your own research when purchasing a house because that particular appraisal won't mean anything years down the road. In a previous post, appraisal A meant nothing just six weeks later. I'd trust a real estate agent and/or an appraiser about as far as I could throw them.

I do agree with your first part, though, if he doesn't like the property itself, he shouldn't go through with it. I'd care a hell of a lot more about market rents in his area and his expected mortgage payment than what one goon thinks his CMV should be as he watched a re-run of Cops while he did his calculation from his "home office"