Home Buying in Orlando>Question Details

Elc, Home Buyer in Orlando, FL

Low Ball Appraisals!!!!

Asked by Elc, Orlando, FL Sun Jan 24, 2010

Question for those in and around the Orlando area. I'm getting ready to close on a bank owned home for a price of 146k. My lender's appraisal just came in at 126k!!! I find this absolutely crazy. Has anyone else had this happened as of late and if so what did you do? It appears now that I will lose the house because of this low ball appraisal. Could this be a new trend?

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Elc, from my experience, your offer to purchase will be honored. You may anticipate the owning bank requesting a second appraisal if the original appraisal doesn't pass internal audits. Chances are, the lasped time from when the initial evaluation was completed has caused some decline that will allow the owning bank to adjust to the new appraised value. The scenarios are endless! However, low appraisals is the norm. Get out your Lowe's discount card and start picking out colors!
1 vote Thank Flag Link Sat Jan 30, 2010
Bank of America is notorious for off the wall appraisals. A seller (Bank owned) I have had some accept the much lower appraisals and other times not really depends on the type of loan you have too. A good way to put the seller in a position to accept your low offer is if you have a good Realtor. If you are using an FHA loan which most first home buyers do when an FHA appraisal is done on a home it stays with that property for 6 months. So lets say the bank doesnt accept your deal but another FHA buyer comes along offering what you did, it wont matter because in the system it will already show the FHA appraised value of $126 and they will not be able to sell it for more to anyone with an FHA.

I have also gone to bat for my clients on a BOA deal where I know for a fact the appraisal was off because 2 of the homes I sold were the exact same as the one my buyer was buying within 1 mile of the home and the same exact thing and sold for the same price we were selling it for. The appraiser they used was from the Tampa area. I had to go to the VP of BOA and wait about 3-4 weeks but I finally got an adjusted appraisal which underwriting did accept.

But again how are you sure the price of $146,000 was justified did your agent show you comps that support the value? I can understand a REaltor and an appraiser being off slightly but not $20k. Hope this helps
1 vote Thank Flag Link Mon Jan 25, 2010
Hi Elc,

Two different perspectives on your situation. As was mentioned, your interests are being fully protected and if the appraisal was properly completed, the bank owning the home should agree to come down to the price appraised of 126K, saving you 20K. Did you have an agent other than the listing agent representing your interests? If so, they should have completed their own analysis or CMA and given you their opinion of what the home you are purchasing was worth. ..

Regarding the mortgage, appraisal industry it is a mess presently, Low ball appraisals are the norm. Many appraisers that are doing work under the new guidelines may be from outside the area and not as knowledgeable about various neighborhoods. Also, the lending banks are subtly pressuring appraisers to use the most conservative data when assessing a property's true value. This is a classic overreaction to the rampant abuses that took place in 2005-2007 of bad lending practices, inflated appraisal values etc. The condo conversion craze in Central Florida was a classic example of all of the worst components of real estate and everyone's interest in simply making money and not doing the right things. Most of those units were never worth close to what they sold for and there were no legitimate comparables to use, yet miraculously thousands of those deals closed, creating the mess of short sales and REOs in the condo business.

Best of luck with your current transaction.

Sincerely,


Marty Kaiser
407-595-9700
marty@floridasells.com
Web Reference: http://www.floridasells.com
1 vote Thank Flag Link Sun Jan 24, 2010
I dont care where your home is, you cant fight the appraiser!
0 votes Thank Flag Link Fri Apr 27, 2012
absolutely! This is the trend and it has happened to us. My suggestion is ask them to lower the price or pay all closing costs. We had 2 appraisals done with similar results. It appears that the appraisals are coming in around 10% lower than the contract price. So you end up bringing to the table more like 30% down. Unless of course you qualify for assistance of some sort... which really makes no sense, but continues to be the American way.

Good luck.
dg/ nsb, fl
0 votes Thank Flag Link Fri Apr 27, 2012
Stick with a local mortgage broker and you will not see this CYA by appraisers, all just a way to manage the Loan To Value of a buyers transaction.
0 votes Thank Flag Link Thu Feb 18, 2010
Hi Elc-

I just had the same thing happen to me with Bank of America. They appraised the home I am trying to purchase at $30K LESS than the agreed upon sale price. I am in NY and the home prices did decline somewhat but the agreed upon price is not way off the charts when put up against comps in the area. Both my BOA loan officer and real estate agent were completely shocked by the value. My loan officer is sending the appraisal for internal review along with additional comps that my realtor sent him so now we have to wait to see if the appraised value will change at all since the seller will not drop the price $30K. Hope you have better luck!

P.S. - I knew someone that had the same issue when their BOA appraisal came back $60K less than their agreed upon price but I still chose to go with them for the same reason you did - the ease at which we were able to get our pre-approval and commitment letter from them.
0 votes Thank Flag Link Thu Feb 18, 2010
Elc
I respectfully disagree that the Bank/Seller will absolutely accept the appraisal as previously stated. Perhaps not. It really depends on the bank and the property and the appraisal and how much it is off.

I would say 'What do you have to lose by asking the bank to lower the price to appraisal"? It is simple answer really, yes or no and if no move on because you can tell the bank you are not the one that is going to overpay for this property. If the bank/seller waits they may find someone that will, but it should not be you. That is the simple advice I would give any customer of mine.

Try not to get too complicated when it comes to these issues. The simplest answers are most time some of the best and follow your instincts, if you want to negotiate and pay higher than appraisal then you may or maybe not. The home may be worth it to you. Best of Luck

I will leave my contact information for your convenience in the event you would like to discuss further.

Regards,
Gay Middleton
Realtor
gaymiddleton@orlandohomeresales.com
407-493-3699
Web Reference: http://www.gaymiddleton.com
0 votes Thank Flag Link Mon Jan 25, 2010
Low ball appraisals are the norm with the HVCC in place. It has caused a lot of problems for Buyers because they are willing to purchase at a certain price when the market is dictating something else. Do your homework on the next property you seriously consider and it might just work out.

You can have a market analysis done by your Realtor to help you make the right decision next time.

Good Luck!

John Forrester-Realtor
0 votes Thank Flag Link Mon Jan 25, 2010
Absolutely the seller bank will accept the appraised value, as long as the appraisal is valid (i.e. the appraiser has used the right comparables), which your Realtor should be able to determine. Hopefully your contract was contingent on the home appraising for the offered $$ or you can go back and renegotiate, so you will have the legs to stand on to continue the negotiation process. Otherwise the seller is legally in a position to simply cancel the contract.

Marty, John and Mark are right... why would you want to pay more than the house is worth? You have an expert opinion in your hands that it is worth $126k, this is an excellent negotiation tool!

Alys Esmond
Century 21 Professional Group Inc.
http://www.YourOrlandoProperty.com
(321)695-5593
0 votes Thank Flag Link Sun Jan 24, 2010
Thanks for much for all the advice but I guess my real question, which I was not clear about, is when the low ball appraisal has been submitted to the bank (seller) do they generally accept something so low? I'm curious to know if anyone has been in this boat where they have had a bank asking one price then the lenders appraisal comes in way under what they bank was wanting to sell the home for.
0 votes Thank Flag Link Sun Jan 24, 2010
Appraisers are given guidelines by the lender -- 6 months, 3 mile radius, list of exact number of comps they want. The appraiser is not there to LOW BALL but to give their opinion of value. If it's low, the comparable neighborhood sales came in low.
0 votes Thank Flag Link Sun Jan 24, 2010
Low or High is a matter of opinion, in this case the appraised value is the "opinion" of the appraiser. Appraisal is an art, not a science- with this in mind- 5 appraisers will come up with 5 different values. It may have been a great "favor" to you having that "low-ball" appraisal.

Appraisers adhere to guidelines that are standard in the industry and must support the value with recent sales comparables of like kind property within the same community.

So, if this particular appraiser did what is customary and expected. His valuation is most likely within 10% of any other appraisal that would have been done.
0 votes Thank Flag Link Sun Jan 24, 2010
And Mark has it correct as well. Now the banks do not choose who does the work, it is the next guy on the list. Therefore, the bad appraisers get just as much work as the good ones, thus making sure the bad ones are well paid and still in business.
Government at "WORK"!!!!

John
0 votes Thank Flag Link Sun Jan 24, 2010
Not being in the profession, you might think this is new, but it's been going on for a couple years now. It is a direct result of the Federal Government coming up with regulatory solutions without regard to the real impact. In point of fact, it IS NOT YOUR LENDER's appraisal. Under the current system, lenders are not even allowed to talk to appraisers.

What we now have is an appraisal industry that is based on the lowest bidder gets the job. (Giving key jobs to the lowest bidder sure served us well on 9/11, didn't it.) HVCC was designed to address some abuse in the past, but as with many government programs it has made things worse. Complain to you congressman and senators. They lost you the house, not the lender.
0 votes Thank Flag Link Sun Jan 24, 2010
Marty has a real reasoned answer, as most of his answers are.

He is correct when talking about : outside the area and not as knowledgeable about various neighborhoods. Also, the lending banks are subtly pressuring appraisers to use the most conservative data when assessing a property's true value."

But as a buyer, it should be your wish to buy at the best price possible. Thus you have in hand an appraisal that shows value lower than you offered and you have a bank that is not willing to lend more than the appraised value shown (be it correct or not).

Therefore, go to the REO and say: "my bank had an appraisal done, and it shows $20,000 less than I offered, how about lowering the price to appraised value!!!!"

John
0 votes Thank Flag Link Sun Jan 24, 2010
Elc,

You should be happy that your bank discovered you are paying too much for the house.

Why would you want to pay more than it is worth?

Go back to REO company and show them the appraisal and and ask them to lower price.

You just saved $20,000.

John
0 votes Thank Flag Link Sun Jan 24, 2010
best thing to do is go back to the selling bank and ask them to reduce the price. Why would anyone wnat to pay more than the appraised price ?

IF you cannot get a loan then others will have a problem too

So the bank could hang around and hope to find a cash buy to pay more thatnthe home is worth but then pigs may fly too.

So, talk to your agent and get him/her to tell the sellers of the problems and ask to get the price lowered to the appraised price

The bank will want to sell the home and can only do so at the market price. The appraiser will have found homes like this one that sold for less. So rejoice in the fact that you will probably get the home for less than the agreed purchase price.
0 votes Thank Flag Link Sun Jan 24, 2010
Elc,

Low appraisals are what we are seeing here in the panhandle as well. My last four transactions have been low appraisals, and normally the seller would pretty much have to eat the difference. The appraisal stands for 6 months, and the likelihood of the seller selling it for more is slim. The only way I know of for the seller to get more than the appraised value is to either challenge the appraisal which is not usually very successful or sell it to someone who pays cash so is not dependent on an appraiser. If you can see some glaring deficiencies in the appraisal you received this also would be reason to do another appraisal. Low appraisals are the newest of the challenges that realtors and sellers and buyers are facing!!

Myke Triebold, GRI, LMC
850-305-6256
MykeSaysSold@aol.com
http://www.DestinHomeRealtor.com
Web Reference: http://www.MykeTriebold.com
0 votes Thank Flag Link Sun Jan 24, 2010
Elc, I am sorry to hear you may lose this home. Unfortunately, we are experiencing this everywhere not just on Florida. The appraiser are being very strict about the comps used now due to the inflationary market we just came from. Being a bank owned home, this could work in your favor. Was the BPO completed by the bank already? If so, if it had a higher value the lender may not allow this value. See when the BPO was completed, what homes were used and if this may possibly need to be updated for todays true value. If the BPO has not been completed, the lender may receive the same information as the your appraiser gathered. Try to have this transaction completed at the 126K, this is in your best interest. Send a great deal of supporting documents to the bank selling to see if they will agree to the lowered price. Best wishes - Jennifer Allen
0 votes Thank Flag Link Sun Jan 24, 2010
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