Home Buying in 11362>Question Details

Yekasi, Other/Just Looking in

appraised value vs contract price

Asked by Yekasi, Tue Jan 10, 2012


do banks always appraise houses less than purchase price? i am a buyer and the appraised value of the house is abt 8% less than my contract price. Is it normal that buyer will renogotiate the selling price with seller as banks will give a hard time on my mortgage? Otherwise, i may not be able to get the mortgage to go thru.

Help the community by answering this question:


Not sure who your lender is, but I feel comfortable telling you that if the appraised value came in 8% less than contract price, it's safe to assume that you're overpaying for the house. With the way the market is today, you can expect to pay close to market value. Your sales contract should have an appraisal contingency protections for you in place so that if the appraisal doesn't come in high enough to cover the sales price you can have an out of the contract. This is something you want to speak to your attorney about. At the end of the day you have options, the first is to ask the seller to reduce the sales price to match the appraised value and amend the purchase price on the sales contract. The seller might or might not be willing to do this, if they're smart they would. Your other option is to cancel the contract and continue searching for properties, as long as you have the appraisal contingency in the current contract. The other option you have is to come up with the additional 8% out of pocket or reduce it from your total down-payment. So if you were putting a 20% down-payment, now your down-payment is 12%, or you can now put a 28% down-payment just to be at a 20% down-payment with your lender, makes sense? If you have any questions or if there is anything I can do to help, please feel free to call or text me anytime, no strings attached.

If my response was helpful, consider clicking BEST ANSWER!

Javier Meneses
Assistant Director of Sales
105 Conklin Street
Farmingdale, NY 11735
(516) 606-9648 Cell
(631) 227-3258 Office
(516) 584-7138 Fax
1 vote Thank Flag Link Wed Sep 17, 2014
Is everyone avoiding the MAIN point. Appraisals are based on certain real estate market facts. "what is going on in the housing market." That is, what the market is dictating not the appraiser. The appraisers interpretation of those facts develop an opinion, appraisal of fair market value.

Why on earth would you pay a builder/seller/agent more than a home is worth????

Have people not learned lessons from the past 6 years? IT IS overpaying for property that has, and did cause the housing collapse. Obviously, builders/sellers/agent don't care. They've cashed the checks and moved on to the next project, vacation, or un-knowledgeable buyer.

The banks don't care they have a sealed deal with you by the trousers, they have insurance, they have a write off, they have the next person buying it in a foreclosure. I guarantee you the foreclosed amount is very close to fair market value.

Buyers BEWARE!!!! Do yourselves a smart and life favor go with the appraised value, or move on to the next home. I've appraised plenty foreclosures over the past years. I'm asking myself will your overpriced home be my next assignment?

I am an appraiser, homeowner, wife, mother. I treat people with honesty and the way I want to be treated.
1 vote Thank Flag Link Mon Jan 20, 2014
Appraisals are conducted by a third party and should reflect current market conditions; if the property appraised for less than the agreed contract price, you can either try to renegotiate with the seller for the lower price, or add more down, or simply walk away. Discuss your concerns with your agent, and or attorney, as they are the ones who can best help you.
1 vote Thank Flag Link Wed Jan 11, 2012
The appraisal is should be done by 3rd party to make sure the value for the home is there. Here are a few other options available to you...

You can appeal the appraisal. (Talk to your lender about this process)
You can get see if your bank to see if you can have another appraisal.
The seller decreases the price (which is your best option)
You can pay the difference if you the seller does not want to reduce the price

Best of luck to you...

Henry F. Brooks II
Realtor, Branch Manager
BMC Real Estate
101B W. Main St. Ripon, CA 95366
Direct: 209.814.0119
Fax: 209.254.6727
Email: henry@realtorbrooks.com
Website http://:www.realtorbrooks.com
Web Reference: http://realtorbrooks.com
1 vote Thank Flag Link Wed Jan 11, 2012
I have rarely seen a bad appraisal corrected, so I would suggest you put your energy into working it out with the Seller.

You have several options: if you really want the house and have the funds you can make up the difference; you can split the difference with the Seller; you can ask the Seller to adjust the price down to the appraised value; or you can terminate the deal.

In this market, Sellers will be more eager to negotiate a new price given an appraisal that doesn’t support their asking price. However, there are some Sellers who will want to try again, because sometimes appraisers don’t know the area and their valuation isn't always right.

Best of luck!
Gwen Janicki
Prudential Fox & Roach
1 vote Thank Flag Link Wed Jan 11, 2012
Hi, The bank obviously wants to lend you the least amount of money possible. They do appraisals to cover themselves in case something happens after you purchase and they need to sell the home. The appraiser gives the bank a range of value and the bankj goes with the lowest number whether it be the contract price or appraised value.


Christopher Pagli
Licensed Associate Broker
Accredited Buyer Representative
William Raveis Legends Realty Group
1 vote Thank Flag Link Wed Jan 11, 2012

Home value and appraisals are driven by local real estate market activity and arrived at through the use of recently sold comparable property. The bank has no control over this.

One would only hope that when a property doesn't appraise for the contract amount that truly motivated sellers and buyers would be able to find an avenue that would resolve the difference, keeping all parties happy. With this said, there are no assurances that a seller would be willing to make up the difference to make things work out.....

Hope this is helpful.

1 vote Thank Flag Link Wed Jan 11, 2012
Hi Yekasi,

The banks have no control over the appraisal. The appraisal is supposed to be done by an unbiased 3rd party and it is done to protect you and the bank to ensure you don't pay more for the home than it is worth.

You have a couple of options:

You can appeal the appraisal. Review the comparable properties (sold properties) used by the appraiser and then check to see if there are any other comparable properties out there that sold for a higher price. If the appraiser agrees they may adjust the price. I have never seen this work.

You can get check with your bank to see if you can have another appraisal done. If they agree, you will risk the price of another appraisal. It may come out better or could possibly come out worse. If the bank won't agree to another appraisal you can switch your mortgage to another bank and get a new appraisal.

If you are doing an FHA mortgage another appraisal or switching companies is not even an option. With an FHA mortgage, the appraisal is attached to the property for a few months.

If nothing can be done to modify the appraisal you have 4 options:

1) The seller decreases the price by 8%.

2) If you have the funds, you pay the 8% difference.

3) You meet in the middle (or somewhere in between). i.e. The seller drops the price 4% and you kick in 4%.

4) The deal falls apart.

In this market, most buyer do not want to pay more for a home than the appraised value but if you really want the home that may be the only option if the seller won't work with you. Of course, if the deal falls apart is the seller going to relist at the same price when they know it didn't appraise. Some sellers will dig in their heels and try it.

I hope this is of some help.


Joe Finnerty
Prudential Patt White Real Estate
Lehigh Valley, PA
1 vote Thank Flag Link Tue Jan 10, 2012
8% would usually include what the seller would expect to pay in agent commissions and closing costs. It would appear that the seller is trying to get the buyer to pay these things by adding it in over the appraised value.
0 votes Thank Flag Link Sat Sep 13, 2014
Our's appraised for 12% less after getting 3 overs for asking price. We are stuck in chicago thanks to the appraisal.
0 votes Thank Flag Link Thu Feb 27, 2014
Your question is critically important and vitally important to understand.
Be aware, the bank does hire a 3rd party to complete the appraisal, but the bank also imposes the conditions regarding the homes that can be included or excluded as comparables. For example, if no comps exist the bank can compel the appraiser to use a monthly adjustment (something like -1.5% monthly) for each month since the last comparable sale. Others will allow the inclusion of short sales. A forced low appraised value is a hidden asset protection plan for the lender.

Naively believing differently will not compel those representing you from preventing this situation(low appraisal) from occurring. Unless of course, you are the buyer. Sometimes, knowing how the process works, you can KNOW the appraisal will come in low. In such situations I will compel the buyer to waive the appraisal contingency. Then means the buyer must have the means to come to the closing table with a pile of cash to pay the difference. The alternative is the seller lowers their price. My action will depend on who I am representing.

In nearly all situation, a lower than offered price appraisal starts the renegotiation process.
It sounds like you are the buyer. If this is an FHA backed loan, you are in a SIGNIFICANT and superior position. Expect to buy at the appraised value.

Best of success in acquiring your new home.
Web Reference: http://www.MyDunedin.com
0 votes Thank Flag Link Wed Jan 11, 2012
No - banks hire the appraisal out - they don't do it internally. You can challenge the appraised value (humans do make mistakes) or you can renegotiate the price or you can increase your down payment to keep the loan to value ratio in line with your lenders guidelines. Good luck!
0 votes Thank Flag Link Tue Jan 10, 2012
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