Home Buying in San Diego>Question Details

Kathybrown70…, Home Buyer in San Diego, CA

FHA appraisal lower than purchase price

Asked by Kathybrown7017, San Diego, CA Fri Mar 23, 2012

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Hi Kathybrown7017,

This does happen sometimes. Recently I had to deal with this issue for one of my clients who were purchasing a home. The options were 1) The Seller could lower the price to appraised value. 2) The Buyer could agree to pay the difference, but would need the banks approval to do so. This option is unlikely in this market as the Bank will not approve this. That is fine, since I do not recommend this option. 3) The Seller can refuse to lower the price and the Buyer can cancel the escrow and get their deposit back. or 4) The Seller and or Buyer can ask for a re-evaluation of the appraisal. Option 4 is what the Seller and my clients opted for. The Appraiser was asked to complete a re-evaluation based on recent comparibles that justified the agreed up sales price. The Appraiser refused to make an adjustment in value. The Seller's ended up paying for a second Appraisal themselves and based off of current comparibles, including those used in the inital appraisal the agreed upon sales price was found to be justified. In the end, my client and the Seller were very happy and the escrow closed. My clients have since moved into their new home. Be sure to speak with your Realtor regarding your options before making any decisions. Good luck!

2 votes Thank Flag Link Fri Mar 23, 2012
Thanks for outlining my options. You have been very helpful.
Flag Fri Mar 23, 2012
And the really weird part is half the time the buyer is the one that argues that the appraisal is too low. I have never understood that one, but have seen it many times. You may think the appraisal is somehow being controlled by the lender or that the appraiser has some vested interest in the amount being low. Not at all. Loan officers get paid by how much money they sell, not how many hours it takes to close the deal. I want the appraisal to be exactly what the market value is, not a penny less. Can there be mistakes? Of course, but I have looked at thousands of appraisals and very, very few were ever wrong. If the seller isn’t willing to accept the appraised value, find another home.

If the lender logs the appraisal with FHA then it stands on that property for 6 months. The seller might be willing to reimburse you for what you spent on the appraisal if he doesn’t want that bad boy logged, just sayin…
1 vote Thank Flag Link Sat Mar 24, 2012
FHA appraisers are notoriously conservative. I normally go to meet with the appraiser to see if
he is familiar with the area, if he understands the positive features of the house justifying the value, and if he is informed about appropriate comps - which you'll be surprised to find out - many of them either are not familiar with the area or didn't look at the comps prior to the actual appraiser.

The adjustments and the comps to pick are up to the seller, but making sure the house is evaluated appropriately is something that often helps.

If the appraiser is not familiar with the area, makes wrong statements about comps, or fails to use appropriate comps - the appraisal can be "rebuffed" (appraisal slang), meaning the appraiser has to prove that his appraisal was done correctly.

If a new appraisal or "rebuff" don't work, negotiation between the sellers and the buyers helps to resolve the issue to mutual satisfaction. It's either meeting half way, or one of the parties closing the gap, or buyer not buying. Most of the time, the issue of the appraisal can and should be resolved...

Hope it will work out for you!

Irina Karan
Beachfront Realty, Inc.
1 vote Thank Flag Link Fri Mar 23, 2012
Thank you. Just what I needed to know.
Flag Fri Mar 23, 2012
That is unfortunate for the seller but could be good for the buyer…or not.

Are you asking a question or just venting?
0 votes Thank Flag Link Mon Mar 26, 2012
The importance of Jim's second paragraph cannot be overstated and is what gives you negotiating leverage to get the sales price reduced. What it means is that value sticks with the property for 6 months so if your deal falls through, any other FHA buyer will be subject to that appraisal during that timeframe - it really ties the hands of the seller or limits their market (non-FHA buyers) in a pretty significant way.

Now you find out if you hired an agent who can/is willing negotiate. Most are stronger at marketing....

Good luck.
0 votes Thank Flag Link Sun Mar 25, 2012
As a buyer (as your profile states), is that not a good thing?

CA DRE 01775528
0 votes Thank Flag Link Fri Mar 23, 2012
What? ?? How can the appraisal coming in lower than the agreed-upon purchase price be a good thing? It's going to cost me a lot of money out of pocket that I hadn't planned on. What is your reasoning here?
Flag Fri Mar 23, 2012
What? How can the appraisal coming in lower than the purchase price be a good thing????? I t''s going to cost me a lot of money out of pocket if I can't get a loan for close to the purchase price.
Flag Fri Mar 23, 2012
It happens. What's your question, Kathy?
0 votes Thank Flag Link Fri Mar 23, 2012
Unfortanately it does happen, sometimes it it is over cautious appraisers and other times it is warranted. You need your agent to work with the listing agent to get comps to teh bank to show if teh appraisal does have a mistake. Otherwise teh seller shas to lower the sales price to the appraised value or you have to pay the difference in cash as they will only loan on the appraised value.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Fri Mar 23, 2012
Hi Kathy,
What is your question?

Feel free to contact me directly.

Sinead McAllister
0 votes Thank Flag Link Fri Mar 23, 2012
That can happen in market that we been experiencing
You can still purchase the house, you will just have pay the difference.
Most homes that are sold by HUD with a little TLC can be sold for more ,
You'll have to decide what the house and neighborhood is worth to you.

Sherry Saudi
Johnstone and Johnstone-
Office 313-884-0600
Cell 888-395-0478
0 votes Thank Flag Link Fri Mar 23, 2012
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