Gab, Home Buyer in Los Angeles, CA

What to do when Appriasal Comes Below Negotiated Price?

Asked by Gab, Los Angeles, CA Thu Jun 26, 2008

We are in escrow on a new constuction condo and the appraisal is coming in $50K to $75K below what we are in escrow for. We are having another appraiser come, and may even have a third. Have you had any experience with the developers lowering the price when you are already in excrow? We have an appraisal contingency.

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Answers

9
First of all, congratulations for having the Appraisal Contingency. Follow the clauses in your appraisal Contingency. You should have an option to buy, have the Seller lower the price to the appraised value or negotiate the difference, or simple walk away.
You may ask your Agent for a Market Analysis for Buyers on the property of your interest as a caution.

I believe that with this strategy, you've got yourself well covered.

Best Wishes Gab,
0 votes Thank Flag Link Wed Jul 2, 2008
I would suggest a 2nd opinion. Get another appraisier who has a Certifed Appraisers License who can support the first report and/or what you are looking for. Get 3 of Avalialbe, Pending, Sold top 3 that are within 1 mile maybe max 2 from subject property.
0 votes Thank Flag Link Wed Jul 2, 2008
The seller should lower the price to the appraised value or you should walk away. Why would you pay more than it's worth?
0 votes Thank Flag Link Fri Jun 27, 2008
Gab, I have run into this. As you have already seen below there are options for you.

1) Pay the $75k ABOVE the appraised price (not recommended)
2) Have your agent negotiate the price down $75k
3) Meet in the middle
4) Have the additional appraisal(s) and hope they come in higher
5) Walk away

Did your agent pull comps for you before you made your offer?

Best of luck to you!
Web Reference: http://www.DotChance.com
0 votes Thank Flag Link Thu Jun 26, 2008
I am glad you have the appraisal contingency. Yes, you should ask your agent what will be the next step. You should go back to the builder and ask to have the price reduced. There are three options if builder doesn't want to reduce the price. Either you rescend the contract , splite the difference and brining in more money, or make up the whole difference since the lender is only going to lend you % based upon the appraisal value. It will depends on how popular this condo complex is and how much you want this home. But if all three appraisal comes that much lower, it seems to be over priced. And yes, I have had situations where seller lowered the price while in escrow. Remember, if you rescend the contract and another buyer buys it, they will face the same problem.
0 votes Thank Flag Link Thu Jun 26, 2008
All those are excellent points by my fellow Realtors, but what does your Realtor say. If I was you, and the seller does not want to lower price, just look for another home. I hope that your contract is on an appraisal contingence.

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0 votes Thank Flag Link Thu Jun 26, 2008
Gab,

Jimmy is right on the money with his answer so I just want to put one more thought out there. You said that you are getting a second and third appraisal. I assume you are doing this to find someone that will appraise the property at a higher value. Other than being a problem with getting a loan on a home, you should also be concerned with the value of the home. Why would you want to have more appraisers come to inflate value? Either the home is worth the contract amount or it isn’t. If the appraisal is truly flawed, then it makes sense to have someone review it for accuracy, but if it is accurate then you should take it as a sign that your contract amount is too high and try to renegotiate or move on to the next home.

Legally, all recent appraisals must be submitted to the lender.

Good Luck,

Ray

Ray Calnan – e-PRO & EcoBroker Certified REALTOR®
Web Reference: http://www.charityar.com
0 votes Thank Flag Link Thu Jun 26, 2008
Hi Gab,
It has been my experience that the developer will WANT to work with you either by meeting you half way, upgrades or even paying your property taxes or HOA for a year! You are under no obligation to continue with the contract if the property did not appraise, however getting more that one appraisal can muddy the waters and possibly effect your ability to cancel the transaction.
Good Luck,
Jill Lowy
0 votes Thank Flag Link Thu Jun 26, 2008
Hello Gab,

If you have an appraisal contingency than the builder should be required to lower the price to the appraisal value or the contract should be non-binding if they refuse. Read the appraisal contingency section of your contract to confirm this is correct. The builder does not have to lower the price, but if they don't, they can not bind you to the original contract terms that you agreed to because the home is not valued at the price you agreed to pay for it.

Jimmy Hutchinson
Atmosphere Realty
0 votes Thank Flag Link Thu Jun 26, 2008
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