Home Buying in Los Angeles>Question Details

Behappy, Home Buyer in Los Angeles, CA

We just signed a purchase contract in the amount of $480,000 for a condo. Initial appraisal was at purchase price, but was questioned and reduced...

Asked by Behappy, Los Angeles, CA Thu Apr 7, 2011

by about $18,000 less than the agreed upon purchase price. We are doing an FHA loan and had $2,000 towards closing costs from the sellers included in our contract. We really love the place and don't want to lose it, but also don't want to come out of pocket $18,000, plus come up with closing costs and down payment. What to do?

Help the community by answering this question:

Answers

14
The seller would be wise to reduce to the price to match appraisal value and here's why: FHA appraisals are connected to a case # that stays in the system and attaches to a property for 4 months (even if it's a new FHA buyer), meaning the sellers won't be able to find another FHA buyer at a higher price than it's current FHA appraisal value.
They could put it back on the market, but it would have to sell to an all-cash or conventional-loan buyer and there's a risk that a new appraisal still would not come in higher. Have your agent use this info with the seller's agent to negotiate the price down for you.
Good Luck!
Suzanne (Suzie) Glaser
LA VILLAGE REALTY
p.310.383.1141 | http://www.LAVillageREALTY.com
(a division of Power Brokers Int'l | lic # 01520327)
2 votes Thank Flag Link Thu Apr 7, 2011
Thank you all for your helpful insight. We ended up agreeing to get rid of the $2k credit towards closing costs and put in additional $1k ourselves.
1 vote Thank Flag Link Fri Apr 8, 2011
If this is a short sale: The bank WILL sell it to you at appraised value.

If this is Mr. Smith the equity seller & he didn't receive multiple offers for higher than $462K where the buyer says "sure, I'll pay cash for whatever the difference is between the appraisal & our offered price",,,then you need to go to Mr. Seller & simply state "We love the property, unfortunately I cannot get my loan unless the property appraises, $480K is too high, I can close in 30 days or less, can we agree on $462K?

EmilyKnell1@yahoo.com
562-430-3053 cell
Realtor Since 1996
1 vote Thank Flag Link Thu Apr 7, 2011
Many buyers make an a big mistake by falling in love with a property that are trying to purchase whereas they have to see it as an investment that makes sense even if they are going to live in this property.
Having said this, negotiate with the seller to reduce the price. It's not your fault that value is declining. Additionally, in many locations, condos are the first properties to devaluate in down time market and the last ones to valuate in up time market. If you need an agent to represent you or know someone, I'll be glad to help.

Have a blessed day!
Doug
(323) 285-8864
Web Reference: http://cashrealty.net
1 vote Thank Flag Link Thu Apr 7, 2011
This is not unusual when the properties'values are declining across all markets. Unfortunately for FHA or any banks, requesting re-appraisal for the sake of adjusting to your desired value would not make sense. Gone are the days that banks were trying to grab loan opportunities and would just conveniently overlook.

Good Luck!!

Daniel Choi
Broker Associate
Nextage Capital Advisors
1521 Wilshire Blvd
Los Angeles, CA 90017
http://www.michantli.com
0 votes Thank Flag Link Tue Apr 26, 2011
Glad you got it resolved.
0 votes Thank Flag Link Fri Apr 8, 2011
Your lender might not approve the loan

Seller might either have to reduce the sales price OR short sale approval from the lender

Your buyers agent should be assisting you with these issues

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Thu Apr 7, 2011
You'll have either come up with cash for the difference, or get the sales price reduced. The only other option would be to have the appraisal revised, which is very difficult on FHA.


Good luck.


Richard
0 votes Thank Flag Link Thu Apr 7, 2011
Your seller is blessed that an FHA appraisal get that close to the list price. You could counter the seller with a lower price, ask the seller to carry financing, or walk.
0 votes Thank Flag Link Thu Apr 7, 2011
This is a good example of what a professional realtor can do for you. Locating a property or buyer is easy it is negotiating and navigating the transaction that is the real work.

Why was the appraisal revised?

Fighting an FHA appraisal is not an easy task. You have a better chance of renegotiating with Seller.
0 votes Thank Flag Link Thu Apr 7, 2011
Tough situation. If you can't or don't want to come out of pocket for the difference, your only real option is to fight the appraisal. This is difficult in the current environment, but it can be done. Not all appraisers know the markets that they work in intimately, and they can and do make mistakes. Have your agent and your loan officer scrutinize the appraisal and make sure the best possible comps were used for the subject property. If any of the comps don't make sense, or if there are better ones available that should have been used, point those out. Get your underwriter involved. If you have a seasoned loan officer working on this file, that will help tremendously.

Or, if this appraisal truly does reflect the fair market value of the property, then you should renegotiate the purchase price.

Feel free to click on my picture to the right and contact me if I can be of any further assistance. Best of luck.
0 votes Thank Flag Link Thu Apr 7, 2011
if you are the only bidder, then why not lower your bid ? or ask that 18K be divided 4 ways ... a little less commission is better than no commission.
0 votes Thank Flag Link Thu Apr 7, 2011
Find a new lender and hope the same problem does not repeat itself...
0 votes Thank Flag Link Thu Apr 7, 2011
If you are working an agent you should consult them. If you didn't use an agent, this is a reason why you should.

Your best option is to negotiate with the seller for a price reduction. Generally they'll lower the price to make the deal happen instead of putting it back on the market only to risk the same issue happening again. Even if they don't reduce it $18k, maybe there is a happy medium so they come down a bit and you kick in a few $$ to make it work.
0 votes Thank Flag Link Thu Apr 7, 2011
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer