This is a tough one! Be prepared to gather a lot of facts to present to the seller. Here are a few:
â€¢ Comps of the last homes sold within a 1/2 mile radius, in the past 6 months.
â€¢ Ask the buyer for a copy of the appraisal and if it is okay to present it to the seller.
â€¢ Step by step, point out to the seller the reasons why the financial institution lowered the amount they are willing to lend.
â€¢ Inform the seller, financial institutions are in the business of making money, and would love to lend the maximum to increase their ROI, etc.
â€¢ Recommend to the seller that he/she orderâ€™s a second appraisal.
â€¢ Do a matrix showing the seller the net profit.
If youâ€™re not getting ahead, after all efforts have been made, do reversed psychology. Ask your seller to trade places, if you were a buyer, would you pay $400,000 for something that appraised for $325,000, only because you liked it?
Pierre King, Associate Broker
Weichert Realtors H P Greenfield
If you did an engineer report you may want to go over it more thoroughly to find if all the main components of the home are in good condition. By the main components I mean the heating system, plumbing, electrical, the roof and overall structure of the home. If there are any upcoming replacements or repairs to be done, you may be able to get the price down.
That's why it's important to have an experienced agent to represent you because there are many things that can come up that can cost you or kill your deal altogether. Contact your agent and if you don't have one hopefully your attorney can assist you.
I hope my answer helped you.
Potential reasons the appraisal was low could be as simple as an incorrect use code 1 family vs. 2 family or perhaps the listing agent gave the appraiser incorrect comps.
There are always anomalies or outliers in prices paid. There may be reasons a buyer will overpay for a particular property such as wanting to be close to relative or friend. I am not certain if this was your situation.
We hope this helps.
Bonnie Chernin and David Rogoff
Coldwell Banker Mid Plaza
Paul and Gerard are right. An FHA appraisal stays with the home.
If you have an agent, he/she should be calling the seller's agent to let
him/her know that. Most contracts make the purchase contingent upon
an appraisal coming in at least at the sale price. If that is the case, you should be able to get all your earnest
money back if you walk away and the seller will be stuck with that appraised value. He may be willing to
drop the price so you can purchase the home. He doesn't have to, but he will come up against the same
obstacle with no matter whom he deals.
$75k is an awful lot of money. Why did you offer so much over market value? Did you see other homes
in this price range before you made your offer? Was this home better? How? Was the appraisal done by
a local appraiser? Call the appraiser and ask him/her to explain. I have encountered appraisers who
valued a home too low because they were unfamiliar with the condition of local, recent sales - and after arguing my points, the appraiser increased the value. PS: my buyer's lender also listened to my arguments
and was very patient. If this was not an FHA appraisal, ask your lender to allow a local review appraiser to look it over. By all means call your attorney if you have any trouble.
First call your mortgage banker and get a copy of the appraisal. Then make arrangements to go and meet with the home seller in person and review the appraisal report with them. Explain to the seller and their agent that if they can locate some recent comparable sales (no more than 3 months old) for higher sales prices, we can provide them to the appraiser and see if we can get the value bumped up. If they cannot find higher comparable sales than the seller may become more understanding and open minded and willing to lower their sales price. If the seller does find higher comparable sales, take those sales to the appraiser and see if you can get the appraised value bumped up.
Another thing you can do is have the bank do a second appraisal with a different appraiser. I recently had a deal where the first appraisal came in at $465,000 and we had a second appraisal done that came in at $515,000 which was the actual selling price! In that case we were able to give the second appraiser higher comparable sales that the first appraiser missed.
I hope this answer is helpful to you, let me know if I can be of further assistance.
Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665
Cellular: (917) 805-0783
Why not ask them to split the cost of a new appraisal. Although you will have to use the appraisal the bank ordered, an appraisal that low tells me that there is a true problem with value.
When the other appraisal comes in low - they may sing another tune and lower the price.
Serving Maryland, DC and Northern Virginia
I recommend to talk to your attorney. If you are protected, you can have your attorney call the other attorney and tell him you would back out of the deal if the seller will not come down. Make sure with your attorney that you are not in danger of losing the down payment by doing so.