If the house is worth almost $100,000 less that what you offered why not think that your offer was to high? Accept that prices are lower. Then make a new offer based on the more pocket friendly reality.

If you had a contingency for appraisal and getting financing both should protect you. Show the new valuation and change your offer based on it.

Even if you have cash there is no good reason to waste that much on a house that is not worth it.

I hope your contract contains an appraisal contingency; you'll certainly have more options if so.

It's time to negotiate. Do you have the cash to add to the deal? If not, then you'll need to have your agent help you to ratchet that price down.

While you could try to pursue the option of contesting the appraisal, I suspect you'll probably end up spinning your wheels or spending more money on another appraisal. Have you already ordered an inspection too? If so, then did you get an estimate from the inspector on how much s/he felt your new home is currently worth as-is? If not, then that's probably a better option. You might also ask your agent to order an independently performed BPO. The answers should all be consistent.

When you put the offer, did your realtor give you a comp how much the home is worth? If no why not? A good realtor always advises his client how much the home is currently worth & what problems to anticipate, so you don't again get into a situation like this.

Depending on how knowledgeable the independent appraiser on the local area is, most valuations are not far from each other. Recently, I comp a 3000 sf, 5 br home with a recent $110K kitchen improvement as $690K+ kitchen adjustment. Appraisal #1 from 1 bank suggested $710K, and lender 2 shows as 700K. Except me they are all out of the area generalists. Neither one believed the 110K new kitchen will adjusted to 110K more.

If the buyers only can afford to put low down(e.g. 10%) , then their contract on over valued (or under appraised properties should be Y down +90K overage. You need to cough up another 90K if you want the house.

To negotiate a 90K concession from the bank is not a trivial chore . The accounting rules have changed they really are in no hurry to liquidate their inventory as before. Good luck.

Selvixxx,
These things happen and if you are within your contingency period by all means ask for a reduction in the sales price. Your agent should have been able to give you a CMA (market analysis) prior to you writing the offer. Do not hesitate in going back to the table and renegotiate, ask for the appraisal, because it should be studied by all sides to make sure that it is correct. There have been many appraisals over the last 15 months that have been way off. If you cannot have access to the appraisal there is a problem. because you are paying for it. Have everyone concerned do their jobs and check out that report. Of course the last resort is, do you have the money to make up for that loss or can you bring in an amount of money that would satisfy the seller?
I wish you the best as you move forward.

Charles Coachman
Keller Williams Realty
San Jose, CA
ccoachman@kwsv.com
charlescoachman.com
(408)439-0766

Selvixx,

First ask to see the appraisal. Your agent may have already requested this information but because you paid for it you may need to request it in writing. Have your agent review which comps were used. If your agent believes different comps should be used, have them present a complete packet with explanation to the lender. This is where the two professionals (loan officer and agent) working together can sometimes make things happen.

If the comps are not valid, then request and adjustment by the appraiser. The loan officer can send in the info to challenge to the appraisal management. In the meantime, request a second appraisal. Make sure the agent also provides a copy of the valid comps to the second appraiser at the time of the appraisal visit.

Also be aware short sale mitagators complete their own evaluation. I had one instance where the buyer's appraisal came in but the lender did not accept the short sale because their valuation was lower. (??) They would not supply their comps and there was no way to adjust the price so my client moved on.

Good luck,
CJ

My colleagues have provided you with some good information. What I can add is the following: If the property is a short sale, then you can submit your full appraisal to the seller's lender and it is likely that the lender will approve a price reduction.

But, the question is: What does your real estate agent think? Does s/he think it is a quality appraisal? If it isn't, then you need to see about getting another one. If it is a good appraisal, then you will need to consider that banks do not typically lend on properties for which the buyer is planning to 'overpay' by 90k

Great question, unfortunately you don’t say if is a cash offer or if you’re getting a loan for the house, if you’re paying cash and the seller is not willing to negotiate and you decide you want the house no matter what, unfortunately you’ll be the one who takes the loss, (as per your information $90-K) if you’re obtaining a loan, the lender will only lend you on the appraised value, the seller at this time can either accept what the house is actually worth or, they can ask you to pay the difference , the seller might even want to cancel the transaction, it has been my experience that most of the time the seller comes to a favorable agreement between them and the buyer, every thing will depend on you, depend on them and on the circumstances. I hope this helps you and good luck

Is the house a short sale, an REO, a regular sale? Depending on the type of sale, there may be room for negotiations.

In one REO my buyer was in contract with, the appraisal did come in lower (not a significant amount like $90K difference, though). So we submitted that to the REO bank and asked that our purchase price be reduced for what it was appraised for. Fortunately, the foreclosing bank and my buyer's bank were the same (Wells Fargo), and we got the approval.

On a regular sale, the appraisal came in at $625K, or $35K less than what the $660K buyers offered. The buyer still wanted the property, and asked their offer to be revised to $15K over the appraisal, or $640K. I thought the seller would be delighted, but the seller refused to budget. So the buyers walked.

On a short sale, the appraisal came in at $310K, but the short sale lender wanted $315K. The buyer came up with the extra $5K.

I'm sure other people have more scenarios they can share.

Good luck, whatever you decide to do.