Home Buying in 02136>Question Details

Mooch8251963, Home Buyer in 02136

Appraisal came back lower than P&S agreement..

Asked by Mooch8251963, 02136 Mon Nov 8, 2010

Battling for almost 2 mths now, finally got to where we wanted to be and the appraisal came in lower than accepted and listed price. VA will not finance and we can't make up the difference or the Bank will not accept at all..Made another offer for house at appraisal cost which is lower than listing and agreed price. Is this the right thing to do? What other options do we have? Working on our own no Realtor involved and very intent on getting things done on our own and timely..

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You have gotten yourself in hot water on your own, and apparently still see no benefit of getting professional assistance from a Buyer Agent at no cost to you? Well then, best of luck to you as you continue to learn things the "hard way" on your own. Bear in mind that the definition of "insanity" is refusing to change one's behavior while simultaneously expecting a different outcome.

I will give you one very important piece of information though, since no other licensed agent who has done so as of this writing: If the Seller's agent put in an Offer on your behalf, that agent is now by definition a "Dual Agent". By law, this had to be disclosed to both you and the seller in writing. And, both you and the Seller had to agree to this in writing. If this agent did not make this disclosure, you and the sellers should report this unethical behavior to the Commonwealth's Board of Registration for Real Estate Agents and Brokers. I have provided a link below for your convenience - while hoping that this was not the case.
1 vote Thank Flag Link Mon Nov 8, 2010
Hope you got everything worked out Mooch. For your next go around you should definitely enlist a buyer's agent of your own. I work mostly as a sellers agent and the appraisal process has been a huge frustration for sellers too, because of distressed properties serving as comps. As realtors, we all know that the true market value of a home is the amount someone is willing to pay for it. That being said, the banks appraiser goes out and more often than not, the appraisal is lower than the agreed upon sale price. Sometimes it suits my seller to hold firm and not come down to the appraisal price. In this case, if the buyer doesn't have enough of a down payment and can't obtain a mortgage because of the appraisal, then he/she needs to bow out - with full return of deposit monies. Hopefully soon, appraisals and market values will be closer matched, in the meantime we all must struggle through the issue. Best of luck to you.
0 votes Thank Flag Link Mon Nov 15, 2010
Just to confirm what others have already said, a good Buyer's Agent would have been available to show you all properties out there including For Sale By Owner. As your fiduciary, a Buyer's Agent must follow your lawful instruction, give undivided loyalty, full and pro active disclosure, maintain confidentiality, be held accountable by you and the state, and must do the due diligence to protect you in the transaction.

So if you had used a Buyer's Agent you would have known the value of the property prior to the appraisal. They would have known the required inspections and who would be a good choice as an inspector.

There are also Buyer Agents who will rebate a portion, and sometimes a significant portion, of the "cooperating fee" back to the buyer. Don't call me; I'm not one of them. But you could have saved a lot of time, money, and aggravation. It shouldn't cost you any more to use a Buyer's Agent and it will probably cost you less.

I think perhaps you may have misperceived the role of a buyer's agent to be that of a taxi driver and order taker.

So now what? Working with your lender, you could probably have a second appraisal. Then it is up to the seller to decide if they want your offer or not. Why would anyone pay more than the property is worth? The seller will run into the same problem with any other buyers using a lender.

I hope this works out for you and I hope you can see the value in using the services of an experienced, real estate agent who follows the Realtor Code of Ethics. You may need to buy or sell again some day.
0 votes Thank Flag Link Wed Nov 10, 2010
Just found out that there was an error on the Appraisal due to the Appraisers part but not sure it was a $15,000. mistake(difference in price). There are other properties that have sold for similar prices and with much less to offer in size. We chose to work on our own only because other than holding a title to an "Real Estate Agent" we were pretty much doing the same thing they could do and lots of people we had called for showing, couldnt make it, didnt show up, couldnt get in the homes, so it became more of an inconvenience to us than us doing it on our own.
I thought as a Sellers Agent, we would be a dream come true, seeing they were solely making the profit. Little bits and pieces come out here and there so its been an inconvenience on more than one part of getting information because you are not told til the end what you actually need or are mandated to have, like a Rodent/Termite Inspection for a VA loan. I think that the Appraisal could have come at a better time as well so that you don't go through a whole P&S battle only to find out the property isn't worth its value in the long run. Everyone makes mistakes but this one was costly adn very time consuming to us if we lose the sale. We are protected all around with contingencies so that is the least of our worries..
0 votes Thank Flag Link Wed Nov 10, 2010
Hopefully, the agent on the other side is working fairly for both parties and that you were properly protected with contingencies. If the contingencies are in place, you should be able to get out of the deal and get back your deposits. If a VA loan is anything like an FHA loan, the appraisal goes with the property. If this was a conventional loan purchase, you can just switch to another lender and try again. Also, if there is supporting evidence that the home is truly worth what you agreed upon, you can always try to fight the appraisal. A lot of times, an appraiser who doesnt know the area gets assigned the property and he may not be familiar with the nuances of the neighborhood.

I'm sorry to hear that you have to go through this. Much of this could have been prevented if you had an experienced buyer's agent working for you. An experienced agent would be able to perform a market evaluation of the property you are purchasing to make sure that it appraises and you are not overpaying.

If the seller is unable to sell, I recommend moving on. There are plenty of homes out there.

Paul Shao, REMAX
Web Reference: http://www.paulshao.com
0 votes Thank Flag Link Wed Nov 10, 2010
Mooch8251963, I apologize if the responses from some of these folks are insulting, I am sure they do not mean to be rude. I see how this could happen and I am sure you already know what went wrong and the ways you could have prevented it. Your options are to contact your attorney and attempt to re-negotiate explaining the facts of the property and the market value, that about it save those protection contingencies.
I know your in a world of hurt if it stays on this course and I can only send my best wishes that it works out.

If you need help on this or any other real estate issues, feel free to call me at 978-335-9092 I will do my best to help.
Jamin Jones - Century 21
0 votes Thank Flag Link Tue Nov 9, 2010
You are correct: the seller's agent's firm would get the entire $16,500 commission if the sale were to go through. If you had hired a Buyer Agent to prevent and/or get you out of this mess, this agent's firm would have received 50% of this commission for representing YOU, with the other 50% going to the seller's agent's firm. You could have had free professional representation!

I also agree with another comment on here that you did not have proper professional legal representation because the Bank's Attorney is only concerned with the Bank - not you. So, in an attempt to cut costs, you paid a very high price, my friend.

Before I take any buyer client to see any properties with me, I sit them down or a complimentary, buyer counseling session in which I explain the entire process from Offer to Closing. I provide a list of ancillary professionals whom I know to have the same high ethical standards that I have, and who really know what they are doing (lenders, attorneys and home inspectors). I write the Offer with my buyers' best interests in mind, and manage the entire process from start to finish to ensure that nobody drops the ball.

I do hope that the next time you decide to buy a property, that you engage the services of an Accredited Buyer Representative who is also a Realtor so you will have someone working for you that has the education, experience and ethics to ensure that nothing like this happens to you again.
0 votes Thank Flag Link Tue Nov 9, 2010
It would make sense for the seller to renegotiate given that the appraised value is lower than expected, but they may not be in a position to do so. If you or your attorney inserted an appraisal contingency clause into your contract you can walk away from the deal, as likely would be the case with a mortgage contingency clause as well. This is, unfortunately, one of the largest problems in financing today - the value of the property. Despite good estimates of a property's value the appraiser is required to weigh heavily on recent sales. We sometimes run into this and can appeal the appraisal if it seems that it is not fairly valuing the property. If your bank is not willing to do that and you can't renegotiate the price then you are pretty much left with no option other than to cancel the deal and look for another property. I know that's frustrating but it is a reflection of today's market.
0 votes Thank Flag Link Tue Nov 9, 2010
I think I have lost most of the enthusiasm with this sale as of now. The sellers agent would have made $16,500. off of this sale not sure how he splits seeing I have no Agent on my end. I have negotiated at reasonable times and with given courtesy. Was not even given the option to be at the Appraisal and not notified until over 24 hrs after it was done. There is a Contingency Clause up until the 19th of Nov..
Realtor thinks Appraisal is B.S but he doesnt hold title as an Appraiser. They can start from scratch but I see it as more loss of time and if the market doesnt recoup and fast more loss of money in the long run. I know the Electrical has to be brought up to code before a sale. Waiting on the Lawyer as well as the Bank to call in the am...thanks everyone for your opinions and answers. I don't believe the Seller will negotiate as this was a process of negotiating already from a $40,000. price drop and then some when a final price was obtained. Some people just don't want to realize the Market is not what it was 5-7 yrs ago and when it will be that again...
0 votes Thank Flag Link Mon Nov 8, 2010
a. Well based on the P&S mortgage contingency clause you should be able to get your deposit back, since the lender will not be able to fund the loan as per the written offer.
b. The realtor (listing agent) or real estate office representing the seller, since you do not have a buyer's agent could be on both sides of the transaction, check the commission paragraph in the P&S (name or Real Estate office and % or amount, if it is more than 2.5 or 3% the total commission)
c. As far as, what is next, you should not pay more than the appraised value.
d. What happens if the seller is not willing to negotiate? Walk out or not,
that will be something that you will have to decide, if it comes down to that.
Best of luck,
0 votes Thank Flag Link Mon Nov 8, 2010
You need a Buyer's Agent and a Real Estate Attorney. Either or both would have helped you properly steer through this transaction without losing any deposit money. The sad thing is that you are paying the listing agent to work against you. The Buyer Agent fee promised in the MLS now goes to the listing broker who now has about double the amount they would have had if you had used a good Buyer's Agent.

If the seller is serious about selling then the appraised value is what they should receive. Obviously they don't have to agree to that, but then you don't have to buy it and they will have difficulty selling for a higher price unless they find a cash buyer.

It doesn't sound like getting things done on your own in a timely manner is working. It still may not be too late. The fact that you are seeking answers here shows that you realize there are Realtors who could have been of help.
0 votes Thank Flag Link Mon Nov 8, 2010
Contacted the Attny tonight waiting on call back. there is a "Contingency Clause" on or before 11/19 so we are in the area of date and time. Realtor thinks the Appraisal is "B.S" but everyone is entitled to an opinion unless of course we work in that field ourselves. Have checked comps in the area and they are similar or less for more included(additional bedrooms, finished basements, all updated). I don't believe there are any other offers on the table and any prior possibles have already walked away. I refuse to pay more for something that will only be worth less. I am very thorough and don't see myself doing anything a Realtor couldn't do and besides this is still a deal to Sellers Realtor even if value is 15,000. less than offered price. I was informed that Winter is not a good time to sell and if house is put back on Market and appraisal comes up even less next time, its a loss all around..
0 votes Thank Flag Link Mon Nov 8, 2010
As we know VA loans require no money down. If you the buyer are unable to come up with difference between appraised value and purchase/listed price there are 3 courses of action you can take. 1) Buyer makes up the difference which we understand you can't do 2) seller recognizes the house isn't worth what it's listed for and agrees to reduce price to make the deal happen 3) both seller and buyer walk away and all deposits returned. Seller puts his/her home on the market and starts all over again. It would behoove the seller to work with you the buyer to make the deal happen since the appraised value is as good as it gets - that's what its value is based on comparable sales in todays market. How many offers does he/she have on the house?? Good luck with your negotiations.
0 votes Thank Flag Link Mon Nov 8, 2010
Has the appraisal been disputed? Are there comps to support your purchase price? I have linked up a blog post I wrote about this:
0 votes Thank Flag Link Mon Nov 8, 2010
Huge red flag = Why are you working without a Realtor? I deal with issues like this daily and help people to appropriately prepare their new offers to the home owners successfully.

Appraisals frequently come in lower than agreed upon sales prices.

A good local professional can help navigate a tricky sale like this. It may be too late at this stage to get an agent involved.
Buying with a va loan is difficult enough to do so without representation is really setting yourself up for a headache.

I am so sorry you have to deal with this situation.

Who wrote the offer for you? Does it contain a mortgage contingency date if so are you within it?
What other contingencies are included if any?

Do you have an official denial letter based on appraisal? If so you need to supply it to an experienced real estate attorney and ask for their advice quickly to protect yourself as best as you can.

Your options are limited by your contingencies.

Best of luck!!
Web Reference: http://www.route495.com
0 votes Thank Flag Link Mon Nov 8, 2010
The Atty for the bank is not looking out for your personal interest therefore you need to check the section that says Mortgage contingency clause and if you are within the date you can ask to extend it and or ask for a loan denial based on appraisal. Then you can get your money back. You should call the bank Atty and see if they will ofer you any help. They actually work for the banks interest. I truly hope you get this resolved. I think all Vets are special people and they should get loans easier. Good Luck! If you want any free advice please call me, it's the least I can do for someone who stood up for our country and our freedom!
Heidi Zizza
mdm realty
Web Reference: http://www.mdmrealtyinc.com
0 votes Thank Flag Link Mon Nov 8, 2010
We did have an Attorney from the Bank review and approve the P&S. We did not work with the Sellers Realtor as he always thought out offers or wants were ridiculous. We did have a Home Inspection and the Electric was faulty and that is all we wanted and was told had to be to code before Sale anyway. It was listed through MLS and we set up our own Appts with Sellers Realtor. It is a Veterans Loan and they will not lend any more than the home is worth and will not allow us to pay anything over the difference or the Loan will be denied and I believe they watch out for themselves. We did have to put $1500 down but I have to read to see if we are able to get it back as we are not walking out of the deal but if the Seller does, we are entitled to a refund. The Inspection came up with a few things that needed to be worked on but Sellers reply was "we must be looking for a new house"..not until we hired a Master Electricion did we know what the Inspector was talking about..
0 votes Thank Flag Link Mon Nov 8, 2010
Yes offer appraised value and not a penny more otherwise your mortgage contingency clause will need to come into play. No Realtors? I hope you had a good attorney and that you are not past your mortgage contingency dates or the seller can keep your deposit
Web Reference: http://www.mdmrealtyinc.com
0 votes Thank Flag Link Mon Nov 8, 2010
It is not an easy situation.I do feel that you need legal representation :it would be easier to negotiate the price down.It is often said that the seller is very confused about the property value.However,the seller may be very greedy,and has no desire to lower the price.If he does not respond positively to your request,you should simply ask for your deposit.You should be able to find another deal as attractive as the last one.Please go to http://www.besthomedeal.com ,and you will be happy.All the best!
0 votes Thank Flag Link Mon Nov 8, 2010
the info that you provided are very limited:
Your other option is to walkout of the deal
So I understand, you are using the Listing Agent as a dual agent or are you buying directly from an owner?
Was your submitted offer subject to appraise at agreed price or not?
As far as the right thing to do, if you want to proceed yes.
Best regards,
0 votes Thank Flag Link Mon Nov 8, 2010
Hi there,
I know that you are doing this on your own, but a buyers agent won't cost you anything. You are doing the right thing though. You are 100% correct in giving a new offer for less. The only other option is to pay the difference out of pocket. Also, have you had your inspection yet? That can also help with negotiation if items show up during the inspection.

Let me know if I can help. My clients actually get a 25% commission rebate.
Best of luck.
0 votes Thank Flag Link Mon Nov 8, 2010
Actually, unless you bid on a "For Sale By Owner" property, you ARE working with an Agent- the Listing Agent as they are the ones who would have shown you the house or hosted the Open House you attended, and taken the offer. Hopefully you included in your offer that the sale was contingent upon the property appraising at or above the accepted offer price. Sometimes using a Realtor isn't such a bad thing as they could have helped you to submit an offer in such a way that it protected you in an event such as the one you are encountering.

At this point, you really should talk to an Attorney and see if there is anything you can do. Good Luck!
0 votes Thank Flag Link Mon Nov 8, 2010
Depending on your Purchase and sales agreement and how the mortgage contingency reads, you may be entitled to back out or renegotiate. Without a Realtor, it's hard to say what you signed. I hope you had an attorney represent you for the P&S at least.

As for the right thing to do.? You need the mortgage to buy the home. An apraisal is meant to protect the bank from lending on an overvalued property. It can also protect you as a buyer. There is no shame in not willing to over pay for a property, but you need to consult a Real Estate attorney to make sure you are not breaching your contract in any way.
Web Reference: http://www.tedduncan.com
0 votes Thank Flag Link Mon Nov 8, 2010
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