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The issue of this thread is a common one and I am glad Dustin brought it up. Read my more general comment further on if you care to. I decided then that the most important Power in my life was not a banker, real estate agent, or any other professional. I have made a few people angry over the years (and even ended up on more than a few ‘black lists’) as a consequence of that decision.
Saving a buyer from a $50,000 mistake helped me sleep better at night. As an aside, ‘coming in low’ on a purchase appraisal does not always kill the deal. Rather, it often allows the two parties to renegotiate. In a recreational area not far from where I live, I was recently engaged to complete an appraisal for a purchase.
When Can a Seller Back Out of a Sale?
Either you can pay for the original appraiser to take a second look, or bring in someone to give a second opinion. The lender may not agree to a second, higher appraisal but it gives the buyer more ground to stand on to meet a higher purchase price. A home appraisal is an official examination of your home by a licensed appraiser that approximates the value of your home.
The appraisal is strong evidence that the price was above the market value of the home. The appraisal is a professional opinion as to the value of the home you want to purchase. Appraisers have to follow rules in arriving at the value of a property, and lenders are not allowed to interfere with the appraiser's judgment. The lender is required to send you a copy of the appraisal.
Will my house appraise for the selling price in the buyer’s appraisal?
Exterior features include neighborhood, street, and comps, which are recently sold homes in the immediate area that are comparable to the house the appraiser is evaluating. For example, if two similar houses in the community recently sold, one for $450,000 and the other $485,000, the appraiser will take both into consideration when appraising your property. In most real estate transactions requiring a mortgage, an appraisal is ordered by the lender. Buyers are expected to assume the cost ($300 to $450 is the national average), which is typically included in the closing costs.
Please dont attack me because i honestly admit i have no knowledge of the appraisal process and this is not intended as an attack on anyone but hopefully a chance for enlightenment. What i see on the appraisal is exactly what was mentioned above estimate came in at 1.5K above the contracted price. I am an appraiser and a Realtor, and I think it should be required practice that appraisers work with buyers at some point in their training. Buyers become very knowledgeable during the process – particularly with the wealth of information available on-line. If I am working on an appraisal of a home which sold for $200,000 and my best “historical” sales data tells me market value is $197,000 or so, my next step is to look at the history of the sale. Conversely, if the home has been on the market for an extended time and there is no explanation as to why they are paying this price, I would be inclined to stick with my original assessment.
Offer seller financing
Versus the lower the loan to value percentage, the lower the risk and therefore the lower the interest rate will be. Find another lender who is happy to lend at 81% loan to value. Also means paying £200,000 which is £15,000 more than the valuation. Renegotiate the price with the seller to pay £185,000 instead.
Nothing requires you to tell the seller it appraised for more. It’s even okay to lie to the seller and tell them, “The VA appraiser approved it for the purchase price.” and leave it at that. You can often use the lower appraised value to negotiate a reduction in the sales price of the home.
The lender bases the LTV ratio on the appraised value of the home; not the purchase price in the contract. Nearly every mortgage application requires a home appraisal by the lender as part of the underwriting process. Ideally, the lender wants to see an appraised value that’s equal to or greater than the price agreed upon by the buyer and the seller, but sometimes the appraisal comes in lower. In those situations, the buyer and seller have to reach a mutually beneficial solution that ensures the transaction will go through. Pending sales and listings are only used on the appraisal report to show what the current market is doing; appraisers do not consider these comps in their final opinion of value. Once the appraiser does their inspection, homes that sell even a day or week later cannot be use as comps.
Thank you for your comments but I can only assume that you did not read my article or at the very least did not understand it. The explanation you give is exactly what I am decrying. The article points out that the sales price should be an indicator but not THE indicator of value. Are you telling me that if you appraised at home independently of the sales price and he came in at $199,000 but the purchase price was $200,000 that you would turn it in at $200,000. We live in a very rural area of a very affluent county. Foreclosures and short sales in the past few years have killed any reliable comps.
If the value is higher than the purchase price, firstly you should be glad you’re getting the property at below market value. But this valuation is private to you as you will have paid for it. Therefore you don’t need to inform the sellers about the higher value and I also suggest you don’t either. Realistically, the answer is “no.” For one, they accepted your offer and would be breaching the sales contract if they wanted to put the house back on the market to capture a higher price. “They really don’t have any recourse after that because we have a signed purchase agreement for that price,” says Haggstrom. When an appraiser assesses your property, they’re providing a professional, educated guess on its value.
This is unless the accepted offer is very much a below market value offer. For a lender, the main purpose of the appraisal is to prevent them from lending more money than the home is worth. By extension, it also protects you as the buyer for the same reason. It makes you better informed so you’re not overpaying for a home. Suppose none of those above tips help get the appraisal back on track. In that case, the buyer can choose to walk away or make up the difference between the appraisal amount and the home's sales price in cash.
I’ve always wanted to express my opinion of value as a range rather than a single number. A single point placement of the value estimate is what puts appraisers in a bad light sometimes, like when the sales price is $301,526. It would nice to be able to say the property’s value is $295, ,000. Also, like another reader commented, I don’t understand why you feel that the value estimate should always be slightly ABOVE the sales price.
If appraisers think the sales price should be considered, why not allow a preliminary value to be submitted that is derived without knowing the sales price, and a second value that considers the sales price. Then we could determine if the impact of the sales price on the appraisal was within reason or if it is more of a driver or the final figure. I was invited back to the same community and to the same subdivision. This time, the home was slightly larger, but otherwise identical to the first one in every way. Now, how would I have felt if I had done the unethical thing with the first deal and “made it work? ” As it was, the amended purchase contract for the first home came over a week later for $320,000.
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