Home Buying in Seattle>Question Details

ma174, Home Buyer in Seattle, WA

Offered above asking, now stressed about appraisal.

Asked by ma174, Seattle, WA Tue Jul 1, 2014

We recently had an offer accepted on a home. We offered $30k over asking in order to get the house. The appraisal is set for this week and I'm wondering how much I should worry about the appraisal coming in at our purchase price. Our agent doesn't seem concerned, but I'm a first-time home buyer and this whole process is just so stressful!

It seems like just about everyone is paying over asking right now - should this help put my mind at ease?

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Answers

73
Make sure you have an appraisal stipulation clause with the offer contract.

This basically states that if the appraisal comes back lower than the offer price that was accepted by the seller, then the seller/bank will lower the sale price to reflect the appraisal price or you have the option to walk away from the deal with a 100% return of your earnest money.

I hope this helps you.

R.Quitman
First United Realty
Alpharetta,GA.
6 votes Thank Flag Link Mon Jul 14, 2014
In the real estate market never assume anything, least of all the advice of the realtor agent. The appraisers these days vary vastly in their competence and vastly in the outcomes of their work. The lenders randomly assign appraisers so your value outcome on the house you are trying to buy can vary by a very wide margin. Virtually all lenders are looking for a minimum of 20% up front equity in the house meaning a loan to value ratio of no more than 80%.
Recent example: a very credit worthy couple bought a 1970's house for cash at $130,000, did a year long renovation for another $146,000.Good house in excellent location. Got an appraisal for $315,000 in January 2014 from a good lender after the renovation was complete. Wanted to now finance the house on a long term basis much like a normal sale/purchase. The good lender was a bit slow and the couple then applied via Quicken Loans--new appraisal was ordered, came in at $220,000 or a difference of $95,000 from the first appraisal only a few months before. Quicken loans could not do anything about it. Couple went back to good lender, they brought the $315,000 appraisal forward and closed the loan at $252,000.

If your appraisal comes in low you have basically two options: come up with the money to satisfy the lender on loan to value ratio or walk away from the deal .Hopefully your agent had the good sense to include a contract clause about financing that allows you to walk away with your earnest money if the deal would not appraise for the lender/buyer. Good luck!
3 votes Thank Flag Link Mon Jul 14, 2014
I suppose you had a poor experience with a agent to say something like "never assume anything, least of all the advice of a realtor.." I would have recommended you find a different agent. I an appraisal comes in low, you actually have a 3rd and possibly 4th option, which is to negotiate with the seller to bring the sale price down to the appraised value, or meet the buyer perhaps 1/2 way. Sometimes, it's possible to have the property appraised again by another appraiser. It's important to be sure the appraiser is local, and truly knows the community.
Flag Mon Jul 14, 2014
Conventional loans are widely available with 5% down, FHA 3.5% and VA 0%. Not that it likely matters though if the buyer was borrowing at the limit of their loan program.
Flag Mon Jul 14, 2014
Banks generally don't offer a loan over the appraised price, so you will need additional funds if it comes in low. Former agent/ atty
3 votes Thank Flag Link Mon Jul 14, 2014
No worries. If the appraisal comes in at purchase price, then you come down and offer what the home is listed for. If there are others in line as well on the home, then the seller will take the best offer. If you're the only ones on the offer, then you're in good shape unless you have unmotivated sellers. It's not unusual to offer more, do the appraisal, it comes in lower and then you readjust. It's a good thing actually because you just might save yourself $30,000. The seller usually loses. I've always said that along with a buyer having a pre-approaval letter prior to putting in an offer on a home, a seller should have a recent appraisal in hand as well so that alot of this house buying stuff doesn't take so long in the beginning. I never want to pay any more for a property than it's worth but in this day and age, especially in CA, there are bidding wars so it doesn't matter what the appraisal comes in at. People will pay more for the property if they really want it. It's a game to some and one that I hate playing when I'm looking for the perfect property.
3 votes Thank Flag Link Mon Jul 14, 2014
Yes, I agree, and it appears to be silly season again, so buyers beware. If you are not savvy, make sure you have a well qualified agent that will not only look after your interests but will dot all the i's and cross all the t's. Banks and lending institutions can be unscrupulous...
Flag Mon Jul 14, 2014
Housing data is plentiful. Valuating a home is not rocket science. Compare the subject property to recent sales and active listings and a market value is relatively easy to determine. Good real estate agents do the homework and show their clients the comparable homes they used to calculate the home's likely appraised value. If you're a buyer, and your agent has done this homework, and you're still willing to offer more than the likely appraised value, there are no surprises. Your agent needs to address the value issue up front with the seller's agent. It's vital to come to a "meeting of the minds," at the time you enter into the contract on how the parties will deal with the value discrepancy. The time to address this issue is not after the buyer wastes money on a home inspection and appraisal. I tell my sellers to insist the buyer agrees up front to be willing to pay the difference. You can be creative here as well - for example, your buyer may be willing to pay "up to $5,000 over the lender's appraised value." or, "The buyer and seller agree to a purchase price which is equal to the appraised value plus $5,000." The idea here is to deal with the issue up front.
3 votes Thank Flag Link Mon Jul 14, 2014
Good post. Hard to do in practice. I tried to do that to my buyers, but they balked.
From a seller's perspective, if the buyers' agent can show ability to close, then hold their feet to the fire for a VERY short financing contingency.
If the buyer really wants it, they will motivate their lender to meet that.
Otherwise, back on the market.
FYI, this was a multiple offer situation. Property was priced right, and appraisal came in at 103% of asking price.
Flag Mon Jul 14, 2014
Let me give you a seller's perspective. I just sold my First Hill condo I've owned for 20 years. I spent $10K to make it flawless, and it is. I spent a lot of time with my broker setting the asking price after spending two months watching every listing on the market.

I priced it exactly what I believed it was worth. I had two offers on the first day, both with escalation clauses for about 3% over the asking price.

I told my broker that I would not accept either offer because both were less than 20% down. I was concerned that the appraisal might not come in ok. My objective was always to price the condo correctly, because I wanted a swift and certain closing.

He calmed me down after extensive discussions with the buyers' agent, and their lender. They agreed to limit the financing contingency to 7 days. I would NOT take the listing off the market longer than that.

The appraisal came in at the sales price. It will close this week.

Two things: If you want to offer over asking price, be sure you know the comparable sales in the area because that's what the appraiser is required to use. Second, if you do make such an offer, don't be surprised if the seller demands that you can fund any appraisal shortfall.

Seattle is a seller's market right now. Some sellers are overpricing their homes, and because of the low inventory, they can get over-listing offers that might not appraise.

The last thing I would do is expect the seller to lower the price if it doesn't appraise unless you can demonstrate it is seriously overmarket and will sit for awhile.

I would have kicked that buyer to the curb in a minute. Because I had a properly-priced, desirable home.
3 votes Thank Flag Link Mon Jul 14, 2014
Agent in Louisville, KY - I recently had a buyer who had an appraisal come in 10,000 below our contract price. We reviewed the comps used and found that they were all over 6 months old, one of them even over a year old! We pulled our own comps and sent them to the appraiser to see if he we re-evaluate. He would not! Based on comps, we knew this home was priced well, if not under market. We started the process of working with a different lender in order to get a second appraisal. (Had to ask the sellers for an extension in the closing date) The original lender then offered to order a second appraisal at no cost to my buyer. Second one came in fine! We closed last Thursday.
3 votes Thank Flag Link Mon Jul 14, 2014
Very useful information. This will be my strategy...NEXT time, Thanks. Our third-party mortgage was a nightmare and we left due to upside-down mortgage and inflated taxes disproportionate to the property. When we were told the property had been inspected and found out BASE Engineering in fact did not...we were flabbergasted. Bottom line....I will never do business with third-party mortgage participants for a Manufactured home. We sold to a woman whose criminal and financial background was supposed to be run, They said they did ; and they did not. She never paid on the contracted amount due us, we were stuck with the tax bill until our lawyer has it dismissed. We made improvement to the property that valued over 18,000 dollars ; including new kitchen cabinets, sink, flooring, replacement windows, gutted and replaced with a new bath, new heating system, and more. The judge sided with us and the "buyer" skipped town. Still no money.
Flag Mon Jul 14, 2014
Be prepared to pay the difference between the negotiated price and the appraised value. This typically takes the form of a larger down payment. This could result in avoiding PMI which could save you $$$.

The lender YOU selected will determine the appraised value. This is where it become truly important to have selected the right lender who also provides you a "Clear-To-Close' before you make a purchase offer. A well vetted buyer makes the assurance of closing greater.

The seller, I am sure, is fully aware that additional negotiation lies ahead. If your lender is Chase, Wells or B of A, much uncertainty remains until the day of closing.

Be aware, the seller can choose to kick your offer to the curb if you reopen negotiations and your lender has a historic record of leaving buyers at the alter.

Every home sale and purchase has its inherent drama. Do this a couple dozen times a year and you simply take each issue as they present. Worrying or expressing concern regarding things that may never happen or have plain solutions is not productive for a professional. Keep the communications open between you and your agent and work towards the solution beneficial to you.
Your agent knows what is going on. Now, let your agent show you what can be done.

Put your mind at ease? Depends on YOUR lender!

Best of success,
Annette Lawrence, Broker/Associate
REMAX
Palm Harbor, FL
727.420.4041
3 votes Thank Flag Link Tue Jul 1, 2014
Best comment on the site. Thanks.
Flag Mon Jul 14, 2014
The choice as others have noted is to renegotiate the price or pay the difference. That said, this question and the increased effect of appraisals in the real estate market exposes a problem with the system. Appraisers, like title insurers, are merely parasites skimming a small fraction off a large transaction in return for little or no service value. This is especially true in a volatile market where there is little solid data to support any established price. With no real liability for their input, appraisers simply follow the wave - they consistently overvalued properties during the bubble and are consistently undervaluing them now. Anyone can search Zillow for comps and produce a report - the real shame is that these reports have no credibility but do have extraordinary effect on the deal. A property's "market value" is fundamentally what a buyer and seller agree upon. As banks have shed their professionals so they have increasingly relied on this cadre of independent clerks to provide a service they are generally unqualified to offer. The result is stress for sellers and buyers alike who find their large investments subject to generalities and whims. If a buyer absolutely loves something about a home, something that might be truly unique then basic economics dictates that this demand carry a premium that the seller is entitled to and the buyer is sometimes willing to pay. If this number tracks above the mean for "similar" properties, so be it. No one intervenes when I pay too much for that used car because it has the combination of factors I want, nor are there appraisers in stock purchases or a myriad of other financial transactions.
2 votes Thank Flag Link Thu Jul 24, 2014
fire your real estate agent. He/ she should have addressed this before submitting the offer. Now if the appraisal comes back low the bank will make you come out of pocket for the difference. Good Luck.
2 votes Thank Flag Link Mon Jul 14, 2014
This is exactly the position we are in - the market here in the SF Bay area is unreal. In order to even be competitive against the many all cash offers, we bid $180,000 over asking, no contingencies. Our offer was accepted over 1 month ago and it has been a battle with lenders ever since, even though we have impeccable credit and were pre-approved for a much higher loan. Our appraisal came in $60,000 short. We filed a rebuttal but the appraiser only brought it up $12,000. Our problem is great house, great location but our place is much larger, nicer than the small bungalows around it so the comps did not support the Price. Bottom line, in order to not lose our $30,0000 earnest money, we had to borrow $38,000 from relatives in cash to make up the difference. We know that the value of the house will increase and we plan to be there for a long time because the schools are good. I have heard of this happening more and more around here, as I see properties coming back on the market. Anyway, this did happen to us & it was a nightmare. We have an amazing realtor and financial team and they got us through. We will be in our new home in 5 days. Good luck to you!
2 votes Thank Flag Link Mon Jul 14, 2014
To millermailbox1, as Redwood City said, the Bay Area is unreal. We moved into our new home last week and are so glad to be in it. The other home that we were gonna bid on went for $200,000 over asking so we're happy with the price we paid. Unless you have gone through the loan process recently, you won't get it. Our previous home was bought in 2003 before the loan crisis & based upon that, the recent banking changes seem crazy. You also assumed we were asking the bank to lend the full amount, ha ha, that tickles me. Again, in this new bank era, it is laughable to imagine asking for a 100% loan. We had a 25% down payment, so we were actually asking for a loan $200,000 LESS than the original appraised value. We had our own cash savings to make up the diff, the $ borrowed from in-laws was for a $40,000 cash reserve that the bank required before closing; never mind the $300,000 in our 401k accounts which weren't "liquid" enough. Also, you can't get an unsecured loan while in escrow, dude.
Flag Tue Jul 22, 2014
Just be glad you have wealthy relatives. Many of us aren't that fortunate.
Flag Mon Jul 14, 2014
This is how it works. You either get out of the property if you can't make up the difference in cash, you as for review, or you don't do the deal. Impeccable credit doesn't matter. Cash is king these days and especially in the bay area.
Flag Mon Jul 14, 2014
Your real estate loan is a secured loan. You can't expect a lender to lend you more than the property is worth right now, on "hopes" it will appreciate! You are expecting to get a loan for up to the amount you are approved for? The approval amount means you have the ability to pay back a higher amount - -if you found a property worth the higher amount now---- that has nothing to do with asking a lender to mix a 'secured debt' with 'an unsecured one' by lending you more than the security is worth. BTW I don't think your realtor is so amazing or they wouldn't have allowed you to do this in the first place. And a good realtor will have a relatonship with a lender all ready to work with you and provide the financial advice you so despartely need, especially when purchasing in the bay area. The fact that you had to borrow so much money from relatives to make up the difference shows that you credit is not so good that you can get an unsecured loan and you should lower your sights.
Flag Mon Jul 14, 2014
Real estate laws and forms vary can vary from state to state, as well as from different MLS regions, as each MLS service typically writes their own contracts. First thing you should do is to read your sales contract. Hopefully you signed a financing contingency form. Most financing contingencies include a clause that covers low appraisal. When I was Realtor a few years ago I was a member of NWMLS, which covers the Puget Sound area. At the time their financing contingencies gave you three options in the event of a low appraisal:

1. Seller can reduced the sales price to meet the appraisal. However, if the seller refuses to reduce the price then you typically have two options:

2. Bring your own cash to the table to make up the difference between the sales price and the appraisal amount, or

3. If you can't make up the difference and the seller won't reduce the sales price, then the deal is cancelled and your earnest money is returned to you.

As I said though, you have to read your contract to see if you have a financing contingency that covers these options and that nothing was changed on the financing contingency (be sure a clause wasn't crossed out in the negotiating). Your contract will tell you everything you need to know about your options for a low appraisal if you have the contingencies in your deal.

If you don't have a low appraisal contingency, then if you are unable to bring cash to the table to make up the difference there is a chance you will lose your earnest money.

I can't stress it enough... READ YOUR CONTRACT!

Good luck! I hope it all goes well for you and you close on your new home.
2 votes Thank Flag Link Mon Jul 14, 2014
Linda H, You are the only person on here that is 100% correct!
Flag Mon Jul 14, 2014
Depends upon the market, I offered lower than asking, yet still a little higher than I wanted to go on my gut instinct, but I let the realtor's advice creep in after seeing the comparative sales around the area. Otherwise I would've probably gotten it for less. The loan people are still going to try to qualify anyone for more than the place is really worth and hope you offer more than it's worth. They all remember the bubble days a decade back and the more money that's involved they get paid better.
2 votes Thank Flag Link Mon Jul 14, 2014
In a 'rising market', it may happen that the house doesn't appraise at the agreed-to price. Check your Contract -- was there any kind of 'appraisal contingency'? In NJ (where Attorneys are used), the Attorney will often (if requested) put in an 'appraisal contingency' -- particular in situations where Offer Price is higher than the Asking Price.

But, as stated by others, even w/o such a contingency, the deal can always move forward if the Buyer is able to come up with add'l Down Payment monies, or is able to drop the percentage down (tho if it falls below 20%, 'PMI' payment may kick in). Sometimes the Seller will indeed re-negotiate -- but it all depends upon your local market and whether there are other Buyers lined up who will buy at the 'above appraised' price.

One reason this can happen in a 'rising market' is that the Appraiser must use past/historical sales data to calculate the 'appraised price'. If the market is rising sharply, the 'past sales' may not reflect this, resulting in a lag in the data -- as new (higher) sales are closed, the sales data 'catches up' with the market.
2 votes Thank Flag Link Mon Jul 14, 2014
Contract price, The price agreed by both parties, dictates "proposed Value".
The appraisal will look at similar types of property in a close proximity of your property and "COMPARE".
These "comps" are then broke down by square foot, age, lot size, features, rooms and "extras". The price of those recent sales, will be adjusted, as closely as possible. Those three adjusted prices will provide a High, low and average "current value" based on what the market is currently doing.
So if all the properties around are selling above asking price, that doesn't matter. What matters is the price they sold for and how they compare to your home.
If the appraisal shows your home valued by comparison lower than your contracted price, you are paying too much for it under today's market conditions for that area. You will have a couple of options if you want to pay that price: Cash to make up the difference or sometimes the lender will take this into consideration and do an adjustment/ justified analysis. The second rarely happens these days.

Good luck.
2 votes Thank Flag Link Mon Jul 14, 2014
Your understanding of the appraisal process is a bit flawed.
In an rising market with few houses available, appraisal is only an issue to a buyer who has to borrow money.
Means nothing to a seller if there are multiple offers.
Whether someone pays too much for it or not, seller doesn't care.
That's the buyer's problem if they want the house.
Flag Mon Jul 14, 2014
This happened to me as a first-time home buyer just last week. Appraisal came in US$9,900 less than the asking price & our original offer. Both our real estate agent & mortgage lender advised us to ask for a price reduction. I was very skeptical, but that's exactly what the seller did! In our case, we were six weeks into this process, so the seller was not inclined to put the house back on the market & it probably wouldn't have appraised any higher next time around regardless. Unless they can find a buyer with deeper pockets, they are better off just dropping the price. We closed Wednesday!
2 votes Thank Flag Link Mon Jul 14, 2014
Just remember one thing your agent the buyers agent at the very beginning if it was me would do a market analysis on the property and area. You want to know what has sold at the listing price and also what has sold 30k over that price if you don't see any comps in the area then there are basically three options after the appraisal.
1) If it doesn't appraise out then the owners can lower it to the price of the appraisal.
2) you could come up with the difference but if that is going to happen then at the beginning have that money put to the side as a back up or
3) you can back out the deal if you don't have the money to put down the difference and the owner will not lower their price the lender will not lend to you they have to go by the appraisal amount.So to sum it up be prepared at the beginning and know the area for where you are buying. Real Estate Agents should know the area and price and the loan officers job is to get the mortgage done.
Good luck.
2 votes Thank Flag Link Mon Jul 14, 2014
I wouldn't sweat it. Ironically or coincidentally, however you like to see it, the appraisal usually comes in right around the purchase price. The appraiser is provided a copy of the contract before he visits the property to make his assessment. Therefore, he knows what both parties agreed to in terms of price. Market value equals what the seller is willing to sell for and what the buyer is willing to pay. We just sold our home in a booming market for 19% more than what our realtor thought we would get for it and, ironically, the appraisal came in for the exact amount of the sales price.
2 votes Thank Flag Link Mon Jul 14, 2014
Be very careful right now the increase in home prices are just more of the same bubble, hpyed by many in the real estate business. The housing correction is far from over, make sure you do your due diligence about what is happening in the REAL economy and don't get caught up in a false narrative. If this is a home you must have and see yourself living in it for the next 20-30 years than the false inflating of the housing bubble may not impact you. However if you are putting yourself and your family in a stressful economic situation where you are assuming everything will continue as it is....you may find yourselt the 'bigger fool' the real estate market is counting on to bid up the market. Be careful and make sure you do your own homework regarding what may be ahead of us in the next 10 years.. that means don't listen to me or anyone else about what you do with your money.
2 votes Thank Flag Link Mon Jul 14, 2014
As a buyer in the same scenario this is what I have been told by multiple people. Make sure there is a contingency clause in your offer that is dependent on the appraisal. If the home comes in less it benefits you. The appraisal is given to you because you are working with your bank. It isn't given to the seller unless you want them to have it. Usually if it appraisers for more it doesn't make a difference the price is set. This is where your clause comes in. You need to decide if the house does come in cheaper, and the seller refuses to drop the price, is the house worth it to you. We offered on a house last week 13k below asking. I did my research on the entire area. They flat out refused. Come to find out the house had been appraised twice for 50k lower. They had put in so many upgrades that they over built for their area. Another thing to look at is does your realtor have your interests at heart. They get paid off of the seller so in truth you need to look out for yourself. The more the house sells for, the more they make.
2 votes Thank Flag Link Mon Jul 14, 2014
As everyone else has already said, trust your broker.
2 votes Thank Flag Link Thu Jul 3, 2014
And educate yourself on how to handle multiple offer situations.
And DON'T overreach. That's what people did in the last 'bubble' and it didn't work out so well.
Flag Mon Jul 14, 2014
Only a fool would offer over asking price, hoping that a bigger fool will eventually pay even more when it's time to sell. Interest rates are artificially low (and thus home prices high) due to government intervention, starting back in the 90's. When it pops back to the normal 6 - 10% range home prices will take another 50% haircut. What lender in their right mind would loan anything over 50% LTV in that environment? The gov is about to get the boot on giving people easy money, the population is tired of the bubbles it causes (because people abuse the system, that's just human nature, and it's sad because that's why easy money policy just doesn't work). Lot of people stuck upside down in their mortgages and have to walk away and let the bank foreclose because they can't sell. Speculators offering above asking, and appraisers/realtors going along with it because the market is "inclining" is what caused the whole mess in the first place. No way good citizens of this country are going to let it happen again. Times, they are a-changin.
1 vote Thank Flag Link Sat Jul 19, 2014
I agree with HelpUBuy on this one. That type of thinking is what gets people to always want to offer 10% under list, ignoring some real bargains that pop up now and then. List price is just a number, and sometimes that number is way off FMV, and it can be low (although it is more likely to be high).
Flag Sun Jul 20, 2014
Not entirely accurate. Asking price may or may not have anything to do with market value. It might be higher or it might be lower. But we really do need the appraisers to their job in order to avoid another crisis.
Flag Sat Jul 19, 2014
Keep your fingers crossed. It is supposed to be based on sold data. However,lately the values seem to match the listing or accepted price.
1 vote Thank Flag Link Wed Jul 16, 2014
The amount of $30,000 could be a little or a lot depending on the total price. For example, if you are buying a property worth $10,000, clearly $40,000 is too much to pay. You should get out of the deal even if it means losing your deposit.

However, if you are buying a property worth $1,000,000, an appraisal value of $970,000 may not be a big deal, especially if prices are rising rapidly in the area.

Usually, whether or not the loan is rejected depends on how large of a loan you asked for in comparison to the appraisal value. If you put more cash down for the property, give a low offer price, and ask for less financing, then there is a better chance the loan will be accepted.

Now matter what though, at the time you make the offer, you should make the offer contingent on the appraisal value and on getting as much financing as possible to protect yourself from paying too much for the property. Just make sure you won't be penalized if you pay off the loan early.
1 vote Thank Flag Link Mon Jul 14, 2014
In a nutshell, if the appraisal comes in lower than your offer and you have protected your offer under contingency to the appraisal report (as suggested by the first commentator above), you would have following options:
1. If you want the house really bad and the lender usually doesn't finance above appraisal, you would need to pay personal cash to cover up any gap between the offer number and the appraisal number.
2. Renegotiate with the seller based on the lower appraisal and your bona fide effort. Most of the time, reasonable sellers would understand and would most likely make you a lower counter offer to meet, if not a full break.
3. If the difference is minor such as $5k to $10k, and you don't want to put that cash on the table from pocket, you may as well try two lenders. Every lender uses its own appraisers, and there will almost always be a little difference between each. But this way you will be paying for the additional appraisal and may have to work with the new lender.
Flag Mon Jul 14, 2014
We recently made an offer on a home for the asking price and the appraisal came back $28k less and our lender said we had to renegotiate the purchase because they would not lend more than the house was worth.
Flag Mon Jul 14, 2014
I think it is the buyers who set the price in the market by paying over asking price. It is us ,who raise the price by paying more than what it is asked. Realtors play a big game by letting you do so; since they will get a bigger commission. One percent of Realtors, will advice you on how to put the offer. Most let you do it, so you get the blame if you pay more than the reasonable price. Realtors Representatives of both (buyer and seller) work as a team, to catch the big fish (you). One of them told me, "just buy it as is" "everybody is offering more than the price. Realtors can care less about you spending more. So, if you want to be part of their game; there is no one to blame but "you", buyers who are willing to pay more than what it is worth. I came to a conclusion, dealing with Realtor Agents, can be worst than dealing with Lawyers.

B.B.
1 vote Thank Flag Link Mon Jul 14, 2014
Saying buyers set the market price is like saying the sun rises in the East. Yes, that's how market's pretty much work... the people paying the money raise or lower price depending on the demand. It's not some conscious choice, it's just how capitalism works.
Flag Mon Jul 14, 2014
_the best thing is to have good communication with your real estate agent and tel him/her what is your budget, how much savings do you have, how much down payment you can afford, and how much monthly payment you can make. if the appraisal comes in lower, you have to pay the deference in cash with eh down payment. this might become stressful to you and your budget.
let your lender give you a scenario of hat your monthly payment and your down payment will be. Don't forget to calculate the taxes costs.
1 vote Thank Flag Link Mon Jul 14, 2014
Hi!! Congrats in your new home; you have several options, let your broker work his magic but if everything goes south, you always have the contingency included in the offer that you can withdraw your offer if the result of the appraisal is lower than the amount that the bank is willing to lend you for the house.
1 vote Thank Flag Link Mon Jul 14, 2014
This is not necessarily correct with our forms. It is possible that the appraisal provisions can be waived by waiving the financing contingency (either intentionally or unintentionally), unless Form 22AA was also used (unlikely).
Flag Mon Jul 14, 2014
My extremely updated home in a neighborhood of 30 year old houses appraised under the sale
price. I was selling by owner. I would not take less than the sales price agreed to. The buyer agreed
with me, as did their agent, that my house was worth more than the appraisal based on non-updated
comps. Their agent cut her fee by ½ and the buyer came up with $15,000 extra to get the deal done.
If they had not, the house would have stayed on the market. Everyone was happy at the conclusion.
1 vote Thank Flag Link Mon Jul 14, 2014
Hi. I'd like to sell my house by owner as well. Because of where I live and houses rarely go on the market in this area the appraiser always uses homes in town (we live out of town) to compare. I get very frustrated because those homes are very old, not updated, no parking, no land, no view etc and I have always felt they appraised lower than it should because of that. So I probably will be asking more that appraisers. Any suggestions?
Flag Mon Jul 14, 2014
Before you made an offer you buyer agents should have shown you what similar homes were selling for to base your offer on. If you went it alone and just made a wild offer over asking, then the appraisal may keep you from buying unless you want to bring the difference in cash.
1 vote Thank Flag Link Mon Jul 14, 2014
So ma174 how did your appraisal go?
1 vote Thank Flag Link Mon Jul 14, 2014
I did the same thing. Luckily the house appraised higher... just as I thought it would. Hopefully you put a contingency in the contract for financing. The market is so crazy right now.. hopefully the appraiser can support the higher offer price. If not you can either negotiate with the Seller to perhaps lower the price or at least meet in the middle.. or come up with the difference out of pocket. One thing you'll want to ask yourself... Knowing millions of people are underwater in their homes right now.. would you really want to pay more than market value? I sold Real Estate for 16 years. I know how emotional this purchase is. Please take a step back and try and take the emotion out of the formula. If the appraisal does come in low, it's not the only house out there that is perfect for you. Most Sellers will negotiate once the appraisal comes in low. Best of luck to you.
1 vote Thank Flag Link Mon Jul 14, 2014
This happened to me, I had to make up the difference between the actual appraisal and the sale price in cash at closing. We tried pulling other comps but the lender would not budge.
1 vote Thank Flag Link Mon Jul 14, 2014
Yes, this a commonly experienced scenario in a recovering real estate market. Your agent should have a good idea of your current active market, so if they feel this will work, it's a good omen. The fact that your trend appeard to be that buyers are paying above the normal asking price is good also.

In the event, the home doesn't appraise for the contract price, you'll want to have an idea of how you will proceed. Speak with your agent about this. They should be able to provide you with some important information that you may wish to consider sooner than later.

Best wishes,

Bill

billeckler@michaelsaunders.com
941-408-5363
1 vote Thank Flag Link Mon Jul 14, 2014
If your offer contains the wording that it is contingent on the appraisal you have two options if the appraisal comes in low.

1. You can walk away, because the mortgage company or bank will loan based on the appraisal, or

2. You can pay the difference out of pocket. The difference between what the bank will loan and your offer.

If your offer is not contingent on the appraisal, you could be stuck (based on the law) and be forced to buy the house. Legally that is called specific performance. That is not usually enforced however, and you will probably still just be able to walk away from the deal.

My question is, Why didn't your agent explain this to you before you made the offer?
1 vote Thank Flag Link Mon Jul 14, 2014
Depend on the state, but in Washington, you just lose your earnest money, since all parties have agreed that is the extent of any damages.
Flag Mon Jul 14, 2014
Trust your agent. Don't stress about the appraisal unless an issue arises.

Congrats on your home!
1 vote Thank Flag Link Wed Jul 2, 2014
Not all agents have an agenda. The trick is trying to find one that has your best interests at hand. When I was a Realtor I always looked out for my clients and never made any decisions based on my commission.

The problem is that there are so many agents these days and many got into the business just for the money. I won five Client Quality Service awards during my ten years as a Realtor, because I took care of my clients. As a result I made a good living, but I was never a top agent, because I spent a lot of time with my clients and put their needs and financial concerns above my own. During the house market "crash" none of my clients lost their home, because I counseled them about their spending limits.

Unfortunately, it doesn't take much education to become an agent. Also, just like any type of business or career, there are good people and bad . When choosing an agent, check with the local Realtor Association and see if any complaints have been filed against your agent.
Flag Mon Jul 14, 2014
Too many Hallmark Card 'agents' on here.
YOU need to know what you can afford, and what realistic prices for houses in that range are.
If not, you're doomed to be 'frustrated'.
Flag Mon Jul 14, 2014
Agree 100% with Ed. They are supposed to be representing your best interests, but invariably have their own agendas because THEIR commission is on the line. So, they'll make issues seem minor to get you to proceed with the sale. For the last home I purchased, our contract did NOT have the clause allowing us to back out if the home appraised lower than sales price, and our realtors refused to add an addendum for it (at first) because they said the contract had already been sent in (but was not yet accepted by seller). After we got our attorney involved they very quickly changed their tune and added the addendum. *Sigh*
Flag Mon Jul 14, 2014
DO NOT TRUST YOUR AGENT! That is the one thing I learned when I sold my last two houses. Agents can't be trusted because they have their own agenda, not yours. They want to get your house sold ASAP, grab the commission, and move on to the next house. So they will deliberately price the house below what you can get. I threw out all the agents, put my house up on BuyOwner and charged 25% higher than the highest price an agent told me to sell it at, and in one month it sold at that price - and I didn't have to pay a stupid agent a commission.
Flag Sat Jul 12, 2014
Ma,
Take a tip from your broker, if they aren't worried, you shouldn't be. The truth is, there is nothing you can do about it until you get the answer. As others have said, assuming you used the standard contract and didn't waive the appraisal contingency, if it happens, you have options. It will be time to renegotiate. It's not an uncommon occurrence in the current market.
Congratulations on winning the bid and I hope you love your house.
1 vote Thank Flag Link Tue Jul 1, 2014
LOL. Don't expect to be able to renegotiate in a bidding war.
Your broker should know enough about the market for that house to back up his certainty about its value.
Otherwise, get a new broker.
Flag Mon Jul 14, 2014
Kary L. Excellent point. Be very careful in the contract where the Appraisal clause . It is always recommended that portion to be completed and not waived. This protects the buyer. This jsut FLOORS me on some of the answer agents/Brokers gave to this question. Reason why many people. both buyer/sellers put Re agents in the same category as USED CAR sales persons.. Most it is about that commission. This is their bread and butter. Even though the Code of Ethics is clear. most agents still violate these codes. They know they will get away with it without anyone challenging their ETHICS..
Flag Sat Jul 12, 2014
Dan, good point about having not waived the appraisal provisions. For the benefit of others, what he's referring to is having not applied for financing timely or actually formally waiving the 22A financing contingency (assuming Form 22AA was not also used or that form 22A wasn't filed out such that the appraisal provisions survive).
Flag Wed Jul 2, 2014
We recently offered asking price with cash on a home in Florida. Our agent told us that investors around the area are buying homes and flipping them. How can you compete with millions of dollars. Someone as an insider telling them to bid over these bids. Its not fair
0 votes Thank Flag Link Wed Aug 26, 2015
That is the stupidest thing one is doing, simply following like a lamb.

First, why should you want to offer 30K extra?

If some one is offering, its their headache. and if you offer extra that means you are agreeing to pay and why you ask it as a question. No sense.

I don't agree with Robert (Alpharetta, GA). Anywhere, in your offer, you made it a contingent with your appraisal, if not, then it shouldn't be an excuse to wak-a-way.

You and like minded people making this market worst, by making false promises. When you can't honor, you shouldn't offer....very simple.

let see what happens if you walk-a-way, and the seller is forced to increase DD (to live on situations like your happen) and it would be a problem to genuine buyers.

I would strongly suggest everyone not to engage/guide these kind of topics.

-Krish
0 votes Thank Flag Link Sat Aug 15, 2015
Hello,
I am a Realtor working in Bay area ( Silicon Valley).
It has become a norm in our neck of the woods, to pay 70k, 100k, 150k over asking price , and No loan ,
No appraisal and No property inspection contingencies.
You should be ready to pay out of pocket if the property does not appraise.
Dont forget the first rule of economy Supply and Demand.
Supply is low, demand is high , the prices will increase and Vice Versa.

Good luck with your purchase , enjoy the journey , dont stress too much.

ali talab
408-858-9300
0 votes Thank Flag Link Thu Apr 23, 2015
Then most likely the seller will have to come down to the appraised value if he wants to sell. The seller could get another appraisal as well to compare. Otherwise, the buyer would have to come up with the additional amount which doesn't make sense and I would assume never (rarely) happen.
0 votes Thank Flag Link Tue Aug 19, 2014
If you had removed appraisal contingency and appraisal comes in low then that is a concern. Otherwise I wouldn't worry .
0 votes Thank Flag Link Thu Jul 24, 2014
No, the fine print in the bank pre-approval letter states (contingent upon the home appraising) The bank wont remove that contingency, so your loan is effected. (Im a Realtor too in Oregon)
Flag Tue Aug 19, 2014
By now the appraisal is probably done and the results known.
0 votes Thank Flag Link Sat Jul 19, 2014
Your agent should have a good idea of the comps in the area where you made the offer. If it appraises too low, you can re-negotiate the price or come up wih the difference in cash.. Any experienced agent would tell you that.

Good luck!
0 votes Thank Flag Link Sat Jul 19, 2014
Only an agent will give an answer like this. If it appraises too low, there's a reason why and you should renegotiate your offer. If buyers don't accept, walk away. Have you seen how many houses are for sale in this country????
Flag Thu Jul 24, 2014
It all depends on your financial tolerance.
0 votes Thank Flag Link Thu Jul 17, 2014
Are there any other recent sales that have closed in the area ? if so - how does the price you are paying compare to the recent like kind sales ?

you should receive the appraisal report next week

you might ask the realtor you are woking with what the steps you have to take if the aprpaisal comes in lower
0 votes Thank Flag Link Wed Jul 16, 2014
As a Realtor in the Boston area, I'm finding this more and more common (specifically with multi family homes). My buyers were losing bids on houses that were priced at "market value" and found that if they did not offer more $$, they were not getting accepted offers. We started bidding over asking price (sometimes $30k+). I place a clause in most of my offers stating that "property must appraise at or above asking price". In some cases, these offers were immediately rejected because the Seller's knew that they could get more for their property than prior comps (market value) were predicting due to an inclining market. A good appraiser can predict an uptrend in the market and will increase the appraisal accordingly. Unfortunately, you can't choose the appraiser and won't know their opinion until the appraisal comes in. If you're in an inclining market area, you have a good chance of still getting the appraisal to come in close to your number. If your agent added a clause giving you the option to back out if the appraisal is not high enough, you can either ask for money off (ask for the difference, or perhaps split 50/50 with the seller), or, if you have additional cash, pay the difference out of pocket. In my experience, the Seller is generally willing to accept a lower amount rather than have to start the sale process over again. Odds are, you are bidding more because prices are going up. Hopefully, that means you'll have positive equity within a few years of ownership. I wish you the best of luck with your purchase. Joanne P.
0 votes Thank Flag Link Tue Jul 15, 2014
This is off topic, BUT I am finding agents here in the Boston area underestimating the value of the homes.
The agents are still spooked out by the crash, and they are pricing houses too low, which causes the banks to appraise low.

They are using comps from last year, and I am even getting offers with comps, telling my price is too high.

Come on brokers/agents you are pulling down the market IMHO
0 votes Thank Flag Link Mon Jul 14, 2014
They are not "bringing down the market" they are attempting to stop people from re-inflating the housing bubble that caused such mayhem. If you pay a lot more than the appraised value, you are either hoping you'll recoup the $ through appreciation, or expect to lose $ because you paid too much to begin with. People paying too much creates the bubble as sellers expect to get more and the cycle just keeps spinning out of control... until it crashes again.
Flag Mon Jul 14, 2014
P-Savy agents are responsible for creating a fair selling price for a property. The basis for creating this number is based on what the market says current similar properties in the area within a certain radius are selling for. Lot size, sq.ft., property type and other similar features are compared to comparable homes in the immediate area. This includes what those other homes have sold for. If everyone in a subdivision bought their home for 250,000.00 to 300.000.00 and in the last 6 months to a year 50% of the homes went into foreclosure and were sold within that 6 month to 1 year window then that is what the market says your home is worth regardless of what you paid or still owe. Remember, you must compare apples to apples. This is called a Market Analysis, not an appraisal. Agents are not licensed appraisers. So legally, agents and brokers cannot refer to their analysis as an appraisal. Therefore if you want a more accuracy then pay for an appraisal.
R.Quitman
First United Realty
Flag Mon Jul 14, 2014
Your offer on acceptance is a legal contract. It doesn't matter if the appraisal comes in lower, your on the hook for what you agreed to pay.
0 votes Thank Flag Link Mon Jul 14, 2014
Rjquitman23
I totally agree with you. I'm here in Northern New Jersey and we have not had appraisal issues here this spring & summer season. Big difference from last year. When I have buyers I ALWAYS add the appraisal contingency clause into the contract. Always play it safe and your looking out for your Buyer
Mary Ann DeOliveira
Weichert Realtors
Chatham NJ Office
Flag Mon Jul 14, 2014
Bernie this is simply not true. I am a licensed real estate agent and I have worked on both sides of the deal. I can offer more than the list price and 99% of the time get the seller/bank to sell for the appraised price or they will have to refund my clients earnest money and we walk. It's called appraisal contingency. Look it up. I never make an offer without it.
R.Quitman
First United Realty
Flag Mon Jul 14, 2014
Don't let Bernie scare you. He is a home buyer NOT a Professional. The Denver market is experiencing the same situation right now where everything is going for over asking price. Talk to your Realtor. In most all contracts there is an appraisal contingency that states that if the home does not appraise for the contract price and the buyer & seller can not come to a compromise then the buyer has until the appraisal objection deadline to give written notice to the seller and RETAIN their earnest money. A seller can not force you to pay more then the contracted price just as you can not force a seller to accept less then the contracted price.

In some cases the buyer will pay the difference in cash or the seller will reduce the price to the appraisal amount. I hope this helps!
*Another tid bit that may help with negotiations, If this is an FHA appraisal and it appraises low, then that appraisal is stuck to that house for approx. 120 days so the seller may want to work with you.
Flag Mon Jul 14, 2014
Unless there are contingencies in the contract. This is exactly why appraisal contingencies exist, and they're common in areas with quickly rising home prices.
Flag Mon Jul 14, 2014
Yes, you should be worried. For if the appraised value is lower than the purchase price then your loan will be denied.
The best way to find out if that is an issue, is look at zillow.com the sold properties in the area with similar size/style/etc. and avg. selling price for last 30-60 days will be what you can expect to be appraised value of your property.
0 votes Thank Flag Link Mon Jul 14, 2014
try Realtor.com
Flag Fri Jul 18, 2014
Seems like Zillow has been lower on actual values lately and has a lot of inaccuracy. Then Trulia seems to value a bit too high.
Flag Mon Jul 14, 2014
Yes, you should be worried. For if the appraised value is lower than the purchase price then your loan will be denied.
The best way to find out if that is an issue, is look at zillow.com the sold properties in the area with similar size/style/etc. and avg. selling price for last 30-60 days will be what you can expect to be appraised value of your property.
0 votes Thank Flag Link Mon Jul 14, 2014
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