Home Buying in 60611>Question Details

Belugagirl97…, Home Buyer in 60611

I made an offer on a REO home and it was accepted but the house has now appraised for $7,000 less than my

Asked by Belugagirl9721, 60611 Wed Jul 29, 2009

offer.
What are my options? (I don't have $ 7,000 cash to make up the difference)

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8
Belugagirl,
More than likely the lender will not give you the loan if the property does not appraise out. This is especially true if you are going with government financing (VA or FHA loan). If you are getting a conventional loan with a substantial downpayment and the loan to value is there than the bank could still give you the loan.
However, it sounds as though you are going minimal money down therefore there are several things that could happen. The seller could reduce the price of the house (which is what they should do since they could have the same problem with another buyer. If you went with a vA or FHA loan than that appraisal will hold for that property for several months or more ( I believe it is 6 months but you will have to ask your lender.If the seller does not reduce the price and you cannot make up the difference financially than the contract will fall through.Hope it works out but it is in the sellers best interest to reduce the sales price to the appraised value. Good Luck!Donna
0 votes Thank Flag Link Thu Jul 30, 2009
Belugagirl - You need to see which properties the appraiser used as comps. We all know that using foreclosed and distressed sales as comparables is driving home values down and creating havoc in the market.
Appraisers are often only required to conduct exterior inspections of properties that are being used as comparables because they do not have access to the interiors. We all know that distressed properties often have serious issues related to deferred maintenance or internal damage that an external inspection simply cannot reveal...the exterior tells only half of the story...if that.

If your appraiser used distressed sales as comps then ...they are not true comps.
Web Reference: http://www.321advantage.com
0 votes Thank Flag Link Thu Jul 30, 2009
Does your contract state "contingent upon appraisal" or anything similar to that? If so then you are not forced to purchase it.

I heard the other day that some appraisers are using foreclosures as comps, but foreclosures are not a valid means of obtaining true market value, and cannot be used. If you find that foreclosures were used, I would demand another appraisal. If the weren't, then demand a lower price!

Banks would never fund a home, especially now, that didn't appraise, and you shouldn't have to either!

Good Luck!
0 votes Thank Flag Link Thu Jul 30, 2009
I agree with all the answers below, but first you need to obtain the appraisal and figure out exactly why the home did not appraise for the full purchase price. That will give you a better understanding of your arguments with the bank to lower the price. If the appraisal is accurate, the bank will have the same issue with the next buyer so they are better off just lowering the price. The appraisal should be sent to the bank with a detailed explanation, perhaps through the attorneys involved. I'd like to hear the outcome, if you please. By the way, the new appraisal rules do not apply to FHA loans so that may be the better route (assuming of course the appraisal is not right on target with its value).
Web Reference: http://www.1sthomegroup.com
0 votes Thank Flag Link Thu Jul 30, 2009
"WOW" Isn't it a great time to be a buyer in America?
The ball is totally in your court on this deal.
With the huge amount of inventory out there it shouldn't be hard to get the deal you want.
I assume your financing? The contract will have a back out clause if the home does not appraise.

Show the bank your appraisal and ask for the discount. If they refuse then refuse to close and start shopping for another home. Sounds like you can buy even more house than the one you were looking at for the money you are trying to spend.
What a buyers market and it's wonderful to be able to buy these homes at such low prices. Take full of advantage of this great time in your life.
0 votes Thank Flag Link Wed Jul 29, 2009
Hello Belugagirl and thanks for your post.

You have two options available to you, assuming that you really want the home and would prefer not to cancel the sales contract: 1) Ask the bank to lower the price by $7,000 or 2) Find a new lender quickly and have another appraisal completed.

One of the problems we're finding under the new HVCC (Home Valuation Code of Conduct) rules instituted for all appraisals done for Fannie Mae and Freddie Mac financing is that appraisals are coming in lower than expected due to the rigorous requirements in the appraisal as well as the lack of local knowledge of many ofthe appraisers ocnducting the review. The HVCC does allow buyers and realtors to request Appraisal Valuations (a revew of the appraisal by the appraiser to see if the figures are correct, and at that time, your Realtor may submit comparables to the appraiser that might increase the value), but I've not yet seen a single appraiser agree to reevaluating his/her report or the price values.

If the appraiser refuses to change the appraised value, your other option is to change lenders as this will allow you to have a brand new appraisal with, hopefully, a more skilled appraiser who will include more accurate or higher values for review.

The other option is to ask the bank (home seller) to reduce the price of the home so that you may obtain a loan on the property. Unfortunately, I've found that banks are neither sympathetic nor cooperative during REO sales, so it may be that your request for a price change will be turned down--however, you won't know that until you try. Have your Realtor contact the listing agent for the home, and request a change to the price.

Good luck!!

Sincerely,
Grace Morioka, SRES, e-Pro
Area Pro Realty
San Jose, CA
0 votes Thank Flag Link Wed Jul 29, 2009
Why would you want to pay 7K more than a bank appraisal says the property is worth???????? The seller needs to drop the price or try to find another buyer whose lender thinks it's worth more. If the other side does not want to lower the price, you are out of the deal. If this is a high rise building, perhaps you should have done your own appraisal of comparables before you wrote the offer, as I assume you do not have an agent, becasue he/she would have done it for you.

philip



philip
0 votes Thank Flag Link Wed Jul 29, 2009
Try to convince them to drop the price so you can close, or find another lender asap!
0 votes Thank Flag Link Wed Jul 29, 2009
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