When the bank appraisal comes in for less than the contract price there are FOUR ways to proceed with the transaction.
1. The Purchaser comes up with the difference in cash. If the appraisal is less than the Purchase price, the Seller basically assumes the Purchaser wishes to buy the house according to the terms of the contract, including the agree upon Purchase Price and therefore will come up with the cash necessary to complete the transaction.
2. The Purchaser and the Seller meet in the middle. The Purchaser comes up with some cash but the Seller also agrees to reduce the price enough to meet the Purchaser somewhere â€œin the middle.â€ Both sides want to complete the transaction and so they work it out. This is compromise at its best.
3. The Seller reduces the Purchase Price to equal the Appraised value. This is the least likely scenario. Sellers often want to complete the purchase transaction on the original terms of the contract, including the price.
4. Nothing happens and the deal is cancelled. The Purchaser either cannot or will not come up with the extra cash and the Seller refuses to reduce the price completely or even a little bit to meet the Purchaser. In this case the transaction is cancelled, the Down Payment is returned, and everyone goes home unhappy. The Purchaser has to begin all over again and the Seller has to put the house on the market and try to find a new Purchaser.
In the end, the motivations of all parties to make the deal happen and close the transaction rule the day. Those motivations drive everyone to find a solution and get the deal closed. Or not.
I'm in this great biz nearly 23 years and so I understand completely the viewpoints of both the Mortgage Pro (Steve) and the Realtors (the rest of you lot! ;-)).
Setting vitriol and argument aside, we all work together to help people buy and sell homes. What Steve seems to have proposed was that the parties involved, whether they be Realtors or Mortgage Professionals, roll up their sleeves and help our HomeOwner Shattenk GET THE DEAL DONE.
If the Lender is charging high fees such as points or origination fees, well, some thinking has to be done there on the part of the Loan Officer to reduce those fees and help make this deal possible (There IS a Seller's concession involved, or no? I'm confused due to the length of the thread..). AND/OR the Realtors might consider kicking in with a commission reduction to make the Seller's net more palatable.
As a rule I adhere to the line that the professinals involved should only reduce fees as an absolute LAST RESORT. While our Seller and Buyer clients may think this less than chivalrous behaviour (British spelling), the fact is we are working in a for-profit capacity and prices/commissions/rates/points are set based on fair market valuations for consideration earned for doing the job.
IF the house is over-priced and the appraisal came in short, then the Listing Agent needs to jump in and convince the Seller of same.
IF there's a Seller's concession involved for closing costs and the appraisal came in short, then the Lender needs to jump in there.
IF the Buyer REALLY wants the home and isn't going to stand on ceremony for "over-paying" for a home (market price, after all, is determined by what a Buyer is willing to pay for something), AND the Buyer has the ability to come up with some or all of the cash to make up the difference, then the Selling Agent needs to jump in, too.
There's no "POOF" or magic involved in making a real estate deal work; there's only WORKING THE DEAL by all the parties involved. Sure EMOTION gets in the way---as proof I give you this thread below---but at the end of the day it's all about helping Shattenk get his house sold to his Buyer.
And Realtors do not get GFE's, buyer's do, and if a lender had a Broker fee of $30,000, I think HUD might have something to say about this.
What would HUD say about a $30,000 Mortgage Broker fee. Would you care to share that with us?
He plays 72 holes just like everyone else, only he works
"hard or harder AND will share" making far less money, just because he is the best.
Manning works for dirt cheap on Sunday as well.
We all know the best work for less,. and they work harder.
Lets assume your are good Real Estate agent, in high demand, working 80 hours a week closing 2 deals a week at $5,000 each, why would you not , as it is suggested, cut your price to $1,000 a deal, close 10 deals a week, working 400 hours a week, thus working harder, and getting the same money????
We are all looking to use our good skills to work 5 times harder for 1/2 the money.
Good Morning Shattenk,
Low appraisals are a chronic and predictable issue in the current real estate market. Your challenge is to determine if you have become victim of a low appraisal or if you are overpriced. Assess your purpose for selling and any deadlines that may exist.
This is not a simple question. Review the process you completed regarding arriving at the price at which you were willing to sell. Are there real, tangible data supporting this value. What has been the market acceptance to your price?
If yes, stand by your evaluation. You will need to ensure your marketing places a spot light on those assets adding value to your home.
Now, the next very important step is to make sure you accept offers from exceptionally qualified buyers. Those 0% down programs MAY indicate a buyer with little latitude. Inquire.
Best of success in selling your Tampa home,
Annette Lawrence, Broker/Associate
Remax Realtec Goup
Let chat about real estate on: http://www.RealEstateMadeEZ.us
You mention the appraisal came in low for your home. When you were given a listing presentation to list your home, hopefully you were given comparable home values that had recently sold so you were not completely surprised by the appraisal.
Anytime you are not working with a cash buyer you are working with a buyer obtaining a mortgage and the appraisal is accepted, rejected or re-negotiated. Questions that may arise are: Do you split the difference, do you ask for the selling price, does the buyer stay or leave?
Susan Penn, PA, SFR, CDPE http://about.me/HomesForSale_SusanJPennPA
EWM RealtorsÂ® | A HomeServices of America Company | An Affiliate of Berkshire Hathaway
2000 Main Street, Suite 103 | Weston, FL 33326
T: 954.306.7337 | C: 954.557.5993 | F: 954.515.0200 | email@example.com | http://www.ewm.com
You can re-negotiate the contract, amending it in line with the appraisal, or you can release the buyer, as stated below.
Any future buyer you procure will most likely encounter the same situation, so you might want to work it out with the one you currently have.
Hope this helps!
sorry, didn't mean to jump ahead of the last few people's posts, but I had spelling errors
example: sales price is 150k and and the value came in at 140k
listing agent rebates $1500 by cutting their take from $4500 down to $3000
buyer's agent rebates $1500 by cutting thier take from $4500 down to $3000
buyer's lender to contribute if origination fee is over $3000
buyers contribute some or increase their interest rate for a bigger lender credit
title company to contribute by lowering fees
this sould work.
If you don't accept the price, then the buyer will have no choice but to either come out of pocket the difference (highly unlikely) or more likely terminate as provided for in the contract and receive their earnest money deposit back. This leaves you having to find another buyer and hope that the next appraiser values it higher which is extremely unlikely and in fact they could come in even lower.
As a Realtor I hate when this happens as it's always extremely disappointing to the Seller, but given the market in Florida overall were I in your position I'd think long and hard before losing this sale.
What is the exact amount of equity being forfeited in realtors points? If it's over $3,000 to each realtor ask them to assist.
As a Mortgage Broker I'd have the listing agent and buyer's agent to both come off of some of those realtor points, buyer pitches in along with obtaining a Lender credit from the loan to pay costs, etc.
Forward this below to the realtors and see if they'll be willing to help save the deal:
The Florida Real Estate Commission (FREC) Rule 61J2-10.028 (2) provides that: a licensee may share brokerage compensation with a party to a transaction as long as full disclosure is given to all interested parties.
US Dept. of Justice Consumer Alert: Consumers Can Save Thousands of Dollars in Commissions
The first one is the financing continency that lets me out of the contract without penalty if I cannot obtain approval from a lender to lend on the deal. Part of my agreement with the lender will be a requirement that the property appraise at or above the asking price otherwise they will not finance the deal. What everyone seems to miss is that the property must be worth what it must be worth for one simple reason. The bank wants to get their MONEY BACK and if the property is virtually (depending on downpayment amount) upside down from the very beginning, the likelihood of that happening is slim to none as we have all seen with the present housing crisis. Having one side or another taking less commission or fees DOES NOT affect the value from the bank's perspective and they still will not and should not lend.
The second contingency would be that the property must appraise at or above my offered price. Yes, competition might drive prices upwards, but I would never purchase a property for more than it is worth, no matter how much I like it. Why would you when you are just asking for problems? As a buyer, I would be trying to negotiate as well. Wouldn't you rather them stick around and try and make it work rather than walk even though it is their right to do so?
This dilemma has to come down to the buyers and the sellers and what they want to do. The seller obviously does not like re-negotiating at this point but they have do not have many options. If they want to sell now, they need to bring the price down. If not, let the buyer walk and wait for a higher appraisal.
I don't know you, but if I were a buyer in NY, you seem to be the kind of level headed and expeinced Loan Originator I would hire to close my loan.
However, down here in Florida, I have a unique Niche with this Realtor Rebate savings that I help my Pre Approved borrowers obtain thru my realtor partners anywhere in Florida.
We're not just talking about a hug and re-gifted bottle of wine as a closing persent either!
See this Buyer's Agent credit to borrower example: http://www.trulia.com/blog/steve_31/2012/06/realtors_are_off
Then, when you consider the above savings can be used on these loan programs that very few lenders have to offer, you have to admit, using both is pretty strong:
See loan programs: http://www.trulia.com/blog/steve_31/2012/07/2012_loan_progra
Unlike other Mortgage Brokers, Lenders and LOs who depend on realtor business for their livelyhood, I do not. Therefore, unlike other Mortgage Brokers, Lenders and LOs, I can tell it like it really is, the way ALL Mortgage Brokers, Lenders and LOs really feel, but are scared to say in public for fear of loosing realtor business.
All I do is offer an alternative to consumers, but seems realtors don't like the tables finally being truned!
Q: if a realtor knew of a lender offering a 2.375% Fixed Rate with NO Points would they tell clients about it , even if they knew the clients had been working with a Mortgage Broker for 10 mo?
A: In a fraction of a second, and likely not even think twice about it on there way home.
Just like realtors do when they refer buyers to their â€œPreferred Lendersâ€, I do the same for my borrowers to help them save Thousands of Dollars in otherwise Forfeited Equity in real estate commission points!
What say you?
I'm always amazed at how realtors seem to feel that their time is all that matters in a deal. They'll enter the scene after 3 failed short sales, 3 loan commitments, and 10 months of non-stop effort by a Mortgage Broker to help their borrowers deal with issues and close on a home. Then, without the slightest concern about the mortgage broker' s 10 months of work, will immediately start with their typical coercion and steering tactics in effort to get the borrowers to jump ship to their lender!
So please forgive me if I'm not onboard with your email below about any realtor's time and costs as when you have been the victim so many times of such ruthless and inconsiderate behavior by realtors, I believe you would see things differently.
BUT, let's look at this from the consumer's position.............
Analogy: Youâ€™re buying a new car and ABC dealership is Demanding you pay Full Sticker Price (i.e. 3% Buyerâ€™s Agent commission), but XYZ dealership is willing to sell you the same exact car for half the price, are you willing to pay Full Sticker at ABC dealership?
Do you care about what ABCâ€™s internal costs are, how much they spend for their building lease, advertising, how big of a name they have, their commission split with the salesman, how much profit they want to make on you just because other dealerships are still making Full Sticker Price on buyers? Itâ€™s the same with realtor Commission Points, consumers donâ€™t have to pay the Full Sticker Price anymore!
Here is a Realtor GFB (Good Faith Bid) , as a Mortgage Broker, why should I not try to assist my Pre Approved buyers obtain this savings?
Can you please explain your comment below?
If mortgage broker Stevie shows up, remember, he's got his hands in YOUR pocket.
....and proud of it! Would you refer anyone to him?
I have multiple realtor partners that sell real estate in Palm Harbor who will gladly offer my Pre Approved buyers REALTOR REBATES on homes all over Clearwater, Palm Harbor, Dunedin, Tampa, St. Pete., etc.
How would I have my hands in someone's pocket helping my buyers retain their home equity in otherwise Forfeited real estate points?
Did you mean I have my hands in realtor's pockets? I just Googled: REALTOR REBATES PALM HARBOR FLORIDA with About 414,000 results (0.19 seconds) of realtors offering REALTOR REBATES.
Do you offer this savings to your buyers?
If you plan these activities right they can prove to be incredibly productive.
If mortgage broker Stevie shows up, remember, he's got his hands in YOUR pocket.
....and proud of it! Would you refer anyone to him?
Try to put some effort to read the appraisal orders banks send to the appraising organisations.
The instructions or rules imposed will create a low appraisal. Seriously, you don't need to be a rocket scientist to figure this out. The appraiser may be fully competent but has been given a bad hand to play.
You will need a strategy to offset the 'fix' the banks have in play. It has been my observation that careful selection of the buyer is essential. If they are at the top of their purchase capability, are looking at 95% financing, they will be unable to pay the real market value. Select carefully.
DO not let a rigged system victimize the home owner.
Have a good strategy
Know the homeowners vulnerabilities.
Make certain they are on board and keep checking.
The tangible assets must be present.
Best of success to you
Annette Lawrence, Broker/Associate
Remax Realtec Group, Palm Harbor, FL
Let's chat real estate on: http://www.RealEstateMadeEZ.us
A Self Employed buyer or Buyer with less than perfect credit wants to purchase a home and has a $1,000.00 Good Faith Deposit. How many realtors can pull up the same exact home on the Menu called the MLS and show that Buyer the same exact property? One thousand? Two thousand realtors?
Now, take that same Self Employed Buyer or Buyer with less than perfect credit, how many lenders or mortgage brokers can actually find a loan that will close the deal without the borrower applying and running credit 50 times? Three? Maybe Four?
QUESTION: since 2006, why is it that Thousands of Mortgage Brokers have become realtors, but very few realtors (IF ANY) have become Mortgage Brokers?
BTW- realtors can receive a GFE, anyone can receive a GFE, it's not like it's some Secret Government Document. There are just new rules as to sending them to the borrower who is actually applying for a loan.
However can we send anyone a Fees Worksheets as the new GFE is too hard for most people to make sense of which is why the Gov. is now, once again having to revise the GFE and spending Millions to do it!
As a realtor, how much do you believe a Loan Origiinator, Mortgage Broker or Lender should be able to make on a $500k loan?
There is a difference with my expeirienced realtor partners working smarter and with my PRE APPROVED buyer referrals, than a realtor meeting potential buyers, showing them 50 homes over 6 mo. only to find out 2 weeks before closing they could never buy to begin with, all because the realtor was terrified to insist the buyer get pre approved in advance.
I do feel bad for some realtors who fall into this category. Realtors are not free tour guides! Like they say constantly, they don't work for free and they have bills to pay. But there's an issue many buyers and sellers have these days with Forfeiting a Tax Free 6% of the sales price as the profit-to-work margin seems to have spiraled out of control!
Now 6% of a $100,000 and under sales price, few have an issue with, BUT on a $500,000 home, Forfeiting a Tax Free $30,000 = $41,000 of the average person's Gross Income for listing or selling a home from the Menu called the MLS does seem...well, kinda high don't you think?
Again, imagine if a Mortgage Broker were to send a realtor a GFE on a $500,000 purchase and on that GFE the Mortgage Broker had a Broker Fee of $30,000 for the realtor to negotiate a seller credit to cover. Absurd you say? Why, the seller is paying it just like the seller pays the realtor commission right?
Pro Option Mortgage/ Florida
Ph: 888 662 4404
Appraisals are a pain in the neck for everyone. If it is an FHA loan the buyer was using and if the lender logged the appraisal that is the appraisal for the next 6 months as far as FHA goes. If it was a conventional loan or if not logged you could contest the appraisal if you have proof it was wrong, sort of hard for the seller to do because you donâ€™t have a copy unless the buyer gives it to you. In my shop the process requires a complaint in writing, back up proof of the error, comparable sales, correct footage, etc. Good luck,
NMLS # 6395
Financing Kentucky One Home at a Time
The biggest question here is did the home appraise high enough to obtain financing? If not, then you would be forced to lower the price to where the bank would lend or go to another lender who hopefully appraise it higher. But there is always the possibility of it going lower as well.
If the appraisal is high enough for the lender to finance then the buyer is not acting in good faith. It is however, not illegal as everything is negotiable. My concern is that if you agree to lower this first time after the deal is made, what will happen when it gets inspected? I could see this person trying to squeeze every dollar they can out of this deal once you give in once.
Trevor's 4 answers below are good, but why isn't the REALTOR REBATE option not being brought up as a solution?
On a $400,000 purchase with an issue like this and the realtors discovered the borrower was paying $24,000 in Origination Fees paid by the seller, you think they'd have an issue with that? I bet they would, what do you think?
As a realtor, would you think the Loan Originator should lower their 6 Points/ $24,000 fee to save the deal?
What if the Loan Originator refused to assist and the deal took a nose dive while saying things like:
I don't work for free!
I don't sacraifice my services!
It's illegal for me to give a credit!
My broker won't allow me to lower my fee!
My commission split with my broker wonâ€™t allow me to do a Credit!
The Seller is paying my Commission!
I give personalized service and I have bills to pay!
WOW, could you imagine if a Loan Originator was sitting on a Cash Cow of money like that and would give these kind of responses?
I like Trevor's answer below.
If this is a financed sale, then the bank, wants the appraised price and buyer and seller will have to negotiate the difference, or you could also try disputing the appraisal.
See, many realtors don't think about things like this or even care about these strategies that can benefit the buyer and their neighborhood's value. This may be because too often they're so blinded with that 6% equity grab and then....POOF....they're out of there at closing and could care less about such things.
There is a reason why thousands of Morgage Brokers have become realtors, but no realtors have become Mortgage Brokers over the past 7 yrs! I don't know of any, do you?
1. If you like the home and can afford to pay the difference or if the seller is willing to help, just buy it at the current sales price. Don't drop the price. If seller is willing to assist, have them assist with closing costs VS lowering the sales price so you can keep the neighborhood sales Cmps higher..
As soon as that sales price is recorded on county record...POOF, now your home is worth what you paid for it!
2. Have the realtors come off some of that 6% commission/ Equity Points, give you a realtor credit towards your closing costs so you can instead pay the difference, keeping the recorded sales price where it is
3. See if you can get a Lender Credit with a little higher rate to do the same as #2
There are a few other ways too. If you want to know about them, email me firstname.lastname@example.org
We Realtors tend to believe Appraisers have it all wrong., that they are working with "data of the past" and we Realtors are working in the present market. We believe they are out to kill deals and unfairly giving out Low appraisals. (Sometimes this is true)
Appraisers, on the other hand, believe Realtors don't do a good detailed job evaluating property, that Realtor's pull numbers from thin air, based on warm and fuzzy feelings. (Sadly they often have a point)
When working with a buyer, I always strongly suggest NOT to over pay appraised price, unless I can come up with a real GOOD reason why the appraiser was incorrect. Moving to a middle ground on an over priced property is just plain bad business for the buyer.
Example: Seller has a dollar coin priced at $2.00 because of it's "special value". Buyer agrees to the $2.00 price if third party appraiser shows this value. Turns out third party appraiser values it at $1.00, then some suggest the parties meet at the middle buying the one dollar coin for $1.50. I would never recommend such to a buyer, but would favor a seller to do such.
How about buyer and seller meeting in middle and get another appraisal to see what another third person says about the property?
La Rosa Realty
If you have an agent you should be speaking with them for counsel. If I were you agent my advice would be to accept the appraised value, close the deal and move on. The chances of your finding another buyer with a better outcome are very slim.
The buyer can make up the difference with extra cash if they can afford it. The bank, however, will not lend more than the percentage agreed to previously. The opetion is to negotiate with the seller that you are buying from for them to reduce the price to the appraised price. Your only other option is to start looking for another house.
I wish you the best of luck.
This is very common and acceptable.
Hope it all goes well,
Villa G Realty, Inc.