Home Buying in 32962>Question Details

Charlie, Home Buyer in Vero Beach, FL

In a short sale if the appraisal comes back from the bank lower than what the seller and owner have agreed on will the bank lower the sale price

Asked by Charlie, Vero Beach, FL Sun Sep 25, 2011

Help the community by answering this question:


No, not always. I have been in several situations where the seller and buyer have agreed on a price and the appraisal came back low and the bank asked the buyer to pay the difference. In this circumstance, the buyers lender won't lend them more than the house is worth. Let's say they agreed to pay $210,000 and the appraisal came in at $200,000, the bank then asks the buyer to pay the $10,000 difference out of pocket, because the buyers lender will only lend the value of the $200,000 that the home it worth.
HOWEVER, I have had a few closings where the bank agreed to the further loss, and reduced the price to the appraised value. It completely depends on the bank. Unfortunately this is one thing that is completely out of our hands. I hope this helps! Good Luck!
2 votes Thank Flag Link Sun Sep 25, 2011
We are in the same situation on a short sale that has gone over 7 months. This has been a crazy process. We knew going in that the BPO was inflated but agreed to the asking price anyway and banking on the appraisal coming in lower. Now the appraisal has been done and it is $20,000 short of the agreed price. We submitted our appraisal to the listing attorney and they submitted it to the Mitigator to talk with the Bank. We just heard back that the bank has requested a new BPO. I don't know what that will do because our appraisal has shown 7 comps, of which only 3 have been sold in the last 120 days. It's an over saturated market with loads of short sales out there. We just can't rationalize paying $20,000 over the appraised value.

We have a clause in our contract which allows us to back out, thank god. Though we sill pumped 7 months time, and over $800 into appraisals and inspections.

Hopefully this will turn in our favor and we'll get our dream home for $20,000 less than we anticipated.

Any advice?
1 vote Thank Flag Link Tue Oct 30, 2012
We are in the same boat. We started our purchase off with a normal fha loan n a house listed for 136k. We offered 135k. They came back with the will be turning it into a short sale. After weeks with nothing they came up with 89k. We accepted. Then the sellers bank (Chase) came back with an appraisal of 108k , that we accepted. Jumped through all the hoops they wanted and it was time for our bank (Pnc) to due their appraisal. Well it came back at 72k. REALLY?! you say yes a crazy 35k below our agreed price it has been 6 months and now we are at a stand still This is my dream home and I don't know what to do.
Flag Tue Oct 15, 2013
We are currently in the EXACT same situation. I'm curious how this turned out for you. We got our written shortsale approval 2 months ago, and ordered the appraisel which also came in $20k less than agreed price. Now, the bank requested a 2nd BPO and I can only see this being bad- i am pretty sure home values have probably gone up a bit since 2 months ago, and I'm afraid they will not agree to our price reduction. What ended up happening for you? *please give me hope - we are 7 months into this and will be devastated if it doesnt end up happening...*
Flag Fri Mar 1, 2013

In Florida, the short sale addendum and contract addresses the "subject to lender approval"--that is for the bank of the seller.

However, there is a financing contingency a normal florida contract that means the sale is "contingent" on the buyer's ability to finance according to the terms in the contract. If the appraisal came in low, that is all the money your bank is going to lend, and it also means that you cannot meat the financial obligations you agreed to in the sale contract. Normally the price is negotiated to the value of the appraisal--one of the things that has cleared up since the 2004-5-6 mess is that banks order appraisals from a clearing house and have no input as to which appraiser they get. This eliminates an appraisal being done that has a "conflict of interest" on behalf of either the buyer or the seller.

I have, however seen deals fall apart because the seller nor the buyer are able to make up the difference even if they agree with the appraisal--the selling bank doesn't have to lower the price.

I hope this helps,

Myke Triebold, GRI, LMC
Web Reference: http://www.MykeTriebold.com
1 vote Thank Flag Link Sun Sep 25, 2011
Hi Charlie,

Not necessarily. Before the seller's lender/investor approved the short sale, they would have had either a Broker's Price Opinion (BPO) or Appraisal done to get current market value. Now that the appraisal has come in lower, the listing agent can go back to them asking them to lower the price. Some lenders/investors will and some won't . It doesn't hurt to have the listing agent ask though. Worse case, they say 'no'. They may split the difference, lower to appraisal, or again, keep the price as already agreed upon. If they keep the price 'as is', you can pay the difference (if your financing allows you to) or cancel contract (if you have an appraisal contingency in effect).

Good luck.

Shanna Rogers
SR Realty
1 vote Thank Flag Link Sun Sep 25, 2011
It doesn't hurt to ask for a credit - you might just get it. The lender and seller should realize that if you walk away from the sale because of the low appraisal (assuming you still have an appraisal contingency), then they will have the same problem with the next buyer. It's to their advantage to work with you and negotiate some type of credit to make the sale happen.

If the lender is not willing to give any credits but you really love the house and would like to still buy it at the current contract price regardless of the appraisal report, then that's your decision. The appraisal report can not judge the personal value of the property to you.

Best of luck,

Oggi Kashi
Broker Associate, Paragon Real Estate Group
All data from sources deemed reliable but subject to error and omission, and not warranted. CA DRE 01844627
Web Reference: http://www.oggikashi.com/
1 vote Thank Flag Link Sun Sep 25, 2011
Charlie if the appraiser from your bank when getting a mortgage comes back lower than the price the sellers bank has agreed to sell the home to you at, your choice may be limited. You would need to submit a copy of that appraisal back to teh sellers bank to ask them to lower the price. It is about a 50/50 chance they will reduce it but be prepared to wait another month unless they have a real good listing agent who gets things done.
0 votes Thank Flag Link Mon Jan 7, 2013
The bank will not lower the price. They are trying to get money on the sale. Even if the fair market value is lower than their appraisal (how does that happen? - bank fraud). I had a situation where the bank did a BPO in April and the value came in at $100,000. The buyer submitted an offer for $100,000 and then backed out. A second buyer came in and made an offer for $100,000 and the lender ordered a new BPO that came in at $450,000. We asked the realtor who did it how it could be so high and she essentially said that the bank pays her salary! We then asked the lender if we could submit a valuation dispute. We did. We submitted a full appraisal which came in at $100,000. A comp analysis from the seller's realtor, photographs of construction damage to the property and a contractor estimate for repairs to the property. The bank declined to lower the price of the property and based the entire purchase price on a single BPO done by an incompetent agent. The bank chose to ignore 3 out of 4 of the valuations (the 1st one done in April, the full appraisal and the realtor's comp analysis).

It's frustrating because there is no way to report this behavior. Sales in this neighborhood are consistently $100,000 and the ONE sale for $450,000 was to an out of state buyer from NY who thought that the price was a deal! It is the only sale for that amount in the neighborhood and it should be excluded as an outlier, but the bank won't be reasonable. Now they are telling the seller to do a DIL or have a foreclosure - this from the bank's "forclosure prevention" division!

Bottom line, without some regulations or oversight by Congress, banks will do what they want!
0 votes Thank Flag Link Mon Jan 7, 2013
Hi Charlie,

You should definitely give it a try. I think the bank should cooperate, if the appraisal is reasonable. The short sale lender should have a BPO, which might be different from your purchase price.

If the bank doesn’t consider your request, then you won't be able to get financing and they would lose a buyer. If they have back-up offers lined up, then they may be less flexible.

Good luck to you! I know short sales are difficult, so be patient…

If you have any questions, please feel free to contact me directly.

Dana De Kleyn, Realtor
Dale Sorensen Real Estate, Inc.
Cell: 772-538-4855
0 votes Thank Flag Link Tue Nov 13, 2012
I have had a short sale in which this occurred. The bank did lower the price. It is a good idea to put a clause in the contract that the price of the house is equal to or less that the appraised value
0 votes Thank Flag Link Sun Sep 25, 2011
If you have it written in as a special clause of the contract that the house must appraise (if you are a cash buyer) then you will not overpay for the house but that does not gaurantee that the bank will take the lower figure. If the buyer is financing the house the bank will not loan them the money if the appraisal is lower than the asking price. I hope this has been helpful.
0 votes Thank Flag Link Sun Sep 25, 2011
It depends if it is the appraisal from the sellers bank to determine if they will approve the short sale, if that is the case then usually no, the price you agreed is the price you would pay unless it is the appraisal from your bank that is giving you a mortgage, then you would have to aks them to lower the price or pay the difference in cash.


Please see my blog for tips on buying ashort sale
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sun Sep 25, 2011
Hi Charlie,

Most of the time the lender(s) approving a short sale have a significantly lower quality appraisal done by a Realtor, not a fully licensed appraiser.

So if your lender's appraiser came up with a lower value then you absolutely should not pay more than that price. Ask your lender to email a copy of the appraisal and forward it to your agent and ask her to send to the listing and and to the lender(s) approving the short sale.

The lender(s) should absolutely give more weight to a current appraisal done by a licensed appraiser rather a mere $40 BPO done by a possibly incompetent Realtor.

Otherwise... walk away and find a true bargain, a bank owned foreclosure.

All the best,
0 votes Thank Flag Link Sun Sep 25, 2011
Each situation is different. I have run into this problem before and we convinced the bank to do their own appraisal. They did and lowered the price. They really don't want you to walk away!
0 votes Thank Flag Link Sun Sep 25, 2011

It really depends on the situation. Most times the REO lender has already received a handful of BPO's (Broker Price Opinions) or the equivalent of appraisals on the property and they've tracked that and updated them several times to get a feel for the actual value. If the buyer's lender orders an appraisal and it comes back well below all of their figures then no, they may not reduce the price. Of course then your lender is going to be hesitant to lend above the figure they received and suddenly you're in a bit of a pickle. It'll then come down to how large of a gap you'll have to make up to seal the deal, what's your current loan to value ratio and how much do you really want this house?
0 votes Thank Flag Link Sun Sep 25, 2011
Ask your agent if the listing agent included an updated market analysis when submitting the offer. This will help avoid this issue.
0 votes Thank Flag Link Sun Sep 25, 2011
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer