Home Buying in 94080>Question Details

Henry, Home Buyer in South San Francisco,...

HELP! Appraised value is too low! What are my options?

Asked by Henry, South San Francisco, CA Fri May 17, 2013

We are in the process of closing escrow when the appraisal report came in. The report states that the home value is lower than our offer price. It is a difference of $65,000 which we can't make up. We were told that we can pay the PMI monthly until we make up the $65,000 which would hurt our savings. We were shock with this valuation as there are plenty of comps that sold recently very close to our offer price. We are totally stress with this ordeal and really want this home.

Some questions:

Can it be that the appraiser is not familiar with the market today in the bay area?

What are our next steps?

Is there anyway we can decrease the amount of PMI without putting any additional cash into this?

How long does an appeal usually take with the lender?

Are we able to contact the appraiser directly?

If we have a no contingency offer, are we still able to negoiate with the seller on a price to help both parties out?

Help the community by answering this question:

Answers

8
Henry, I just saw your reply, you said that two of the comps were high and one wasn't due to a short sale.

I would fight till the end. What did your agent tell you and what did your mortgage professional say?

Tap
0 votes Thank Flag Link Fri May 17, 2013
I saw your other question and now I understand your situation a little better. I didn't know there was no appraisal contingency. Is this correct?

The appraiser should be well aware of the market conditions. If not, that may be one of your agruments. You can appeal the appraisal and it shouldn't take long. The FIRST thing you need to do is have your agent get the comps to justify the appraisal and get them to the lender. Otherwise, you need to do one of two things. I would pay for another appraisal if the lender will agree to it, or find another lender. While another lender may come back with the same value, at least you are fighting for the home and your deposit. Right now, don't concern yourself with PMI, that's not the issue.

Did you put a 3% deposit into escrow? Also, you said your agent went over comps with you, were they the same value as what you offered? You said close, how close?

Call me before you decide to throw in the towel, I might be able to help you protect your deposit. Anything would be better then losing your money, and the home.

Best,

Tap
http://www.DavidTapper.com
415-370-7195
0 votes Thank Flag Link Fri May 17, 2013
So the appraiser used 3 comps within the area. Two of them high in value and other one was super low because it was a short sale. Can this be used in the rebuttal or it won't make a difference?
0 votes Thank Flag Link Fri May 17, 2013
Henry,

I'm going to need to make a judgement call so stay with me. Because you mentioned SSF I'm going to assume that we are talking about a property in that City. If that's so then then the average price for a single family home is under $650,000 which would make the amount that you mentioned ($65,000) more than 10% of the value of the property in question. To get the Appraiser to come up 10% or more would be a very difficult task indeed.

The first option I would recommend is to appeal to the seller. If the Offer you made was non-contingent then it would be up to them if they wanted to amend the Purchase Contract and reduce the purchase price. The possibility that you would be responsible for the deficiency between the appraised value and the purchase price should have been discussed long ago with your agent.

Option #2 would be for you to pursue financing for the property. Lately my clients have moved away for FHA financing because of the high costs of Mortgage Insurance and have leaned towards get a 1st loan for say 80% and a 2nd loan for the remainder of the amount. The 2nd will be a little higher rate than the first loan but the monthly cost in the increased rate could be less than the monthly MI.

Option #3 would be to back out on the purchase and hopefully loose only 3% of the purchase price if
the Liquidated Damages clause was fully signed by all parties. Please understand that at this point I MUST advise you to talk to an attorney who deals with such matters.

I hope this helps and believe me, I do understand why you agreed to a non-contingent offer. It seems that in today's market those are the only offers that are being accepted in the Bay Area.

Regards,
Michael

http://www.MKaprielian.com
0 votes Thank Flag Link Fri May 17, 2013
Thank you Michael for the response. The average listing price for a single family home in SSF is $650k but those are not the selling prices usually. I've seen home listed at this price sell for over 690k to 710k. For the past year or so that we've been looking the market trend has been going up and up. When we first started houses were listing at 540k now there are over 650k.

We are doing a rebuttal now as the comps around the area are 690 and the appraiser used a short sale within their comps and that sold for 623k. If that falls thru, we'll have to negotiate with the seller and hope they can be reasonable. Regardless, looks like we'll be paying for PMI which SUCKS!
Flag Fri May 17, 2013
I don't think we have enough information to give you a meaningful advice here. Talk to your realtor and your mortgage broker. You may have a lot of options or none at all without loosing the deposit. You may also need to consult a lawyer.
0 votes Thank Flag Link Fri May 17, 2013
If the appraisal is FHA that appraisal stay with the house for 6 months. Your only option is to rebuttal the appraisal and see if the appraiser will change the value - not likely.

If the loan is conventional you can get another appraisal, have another appraiser rebuttal the appraisal, or go with a whole new lender with a different appraisal pool.

However, with that being said you would need the seller's blessing and have them give you an extension IN WRITING so you have more time.

If you have a NO CONTINGENCY offer you are bound to your offer. I am not sure if you have a Realtor but a no contingency offer sounds insane. I hope you have a clause some where in there to back out if need be.
0 votes Thank Flag Link Fri May 17, 2013
Hi Laura- saw your reply. Guessing you're not too close to the Bay Area housing market. The only offers being accepted these days have no contingency clauses and there have been approx 20 bids per house on the market, though this is slowing (we're looking for a home in San Jose). We lost out on our last home when it went $150K over asking price with a no contingency clause. Prices seem back to 2007 levels.
Flag Tue May 28, 2013
We started out using contingency offers but after a while, to be more competitive with the market as we are getting outbid all the time, we did no contingency. The house itself has no problems tho.
Flag Fri May 17, 2013
We started out using contingency offers but after a while, to be more competitive with the market as we are getting outbid all the time, we did no contingency. The house itself has no problems tho.
Flag Fri May 17, 2013
We started out using contingency offers but after a while, to be more competitive with the market as we are getting outbid all the time, we did no contingency. The house itself has no problems tho.
Flag Fri May 17, 2013
We started out using contingency offers but after a while, to be more competitive with the market as we are getting outbid all the time, we did no contingency. The house itself has no problems tho.
Flag Fri May 17, 2013
The appeal process should take no longer than 5 business days.
You cannot contact the appraiser directly.
Your agent must provide the loan officer with additional comparables to support the value and a written rebuttal as to why they believe the value should be $65k higher.
Your agent can help you whether or not you can renogiate with the seller.
When you wrote the offer without contingenices, you pretty much said you did not care what the appraised value would be.

The good news is, you can look at the value in six months and refinance?

You, also, have the option of requesting a new appraisal (at your cost). Should that appraisal come in higher than the appraisal rebutted, you can use the new appraisal.
Should this appraisal come in lower...you will have to use the lower value.
0 votes Thank Flag Link Fri May 17, 2013
Can you explain a little bit more about the refinancing options? Your saying we can do a refinance 6 months down the road to make up for the 65000?
Flag Fri May 17, 2013
Can you explain a little bit more about the refinancing options? Your saying we can do a refinance 6 months down the road to make up for the 65000?
Flag Fri May 17, 2013
Can you explain a little bit more about the refinancing options? Your saying we can do a refinance 6 months down the road to make up for the 65000?
Flag Fri May 17, 2013
Can you explain a little bit more about the refinancing options? Your saying we can do a refinance 6 months down the road to make up for the 65000?
Flag Fri May 17, 2013
Can you explain a little bit more about the refinancing options? Your saying we can do a refinance 6 months down the road to make up for the 65000?
Flag Fri May 17, 2013
Can you explain a little bit more about the refinancing options? Your saying we can do a refinance 6 months down the road to make up for the 65000?
Flag Fri May 17, 2013
Can you explain a little bit more about the refinancing options? Your saying we can do a refinance 6 months down the road to make up for the 65000?
Flag Fri May 17, 2013
I hope you have an agent??? That person should be your guide...

Some general options though:

1) Get a copy of the appraisal and review carefully looking for mistakes. If you find any...let your bank know that!

2) Order a second appraisal (which unfortunatey you pay for)

3) Ask the seller if he/she will come down in price

I haven't heard of low appraisals since last year...market trends have been increasing so fast.

Hope tthese thoughts help!
0 votes Thank Flag Link Fri May 17, 2013
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