Home Selling in Sacramento>Question Details

Taffy95630, Home Seller in Sacramento, CA

The buyers signed off on all Contingencies and their appaisal came in low do I get to keep deposit?

Asked by Taffy95630, Sacramento, CA Sat May 23, 2009

The difference is only a few thousand dollars but we feel the appraisal was rigged (it was done by a friend of the broker financing the loan)we aren't going the pay the difference like they are asking us to.

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8
Appraisals seem to be coming in lower in general on many properties I see and can cause renegotiation of
price. Elizabeth points out correctly that the deposit portion is related to whether the appraisal contingency has been removed and if buyer is still in the time frame of removing or not removing the appraisal contingency.

Keep in mind, though, that getting a new buyer doesn't mean the low appraisal problem won't crop up again.

The appraisal must have been done before May 1, as the new law Home Valuation Code of Conduct (HVCC)
precludes the following:

Direct contact between a loan originator and an appraiser.
Passing an expected or desired value.
Requesting estimated values or sales comparables prior to completion of an appraisal report.
Direct payment for appraisals to appraiser by origination-related personnel
Web Reference: http://www.annaboyd.com
1 vote Thank Flag Link Sat May 23, 2009
Taffy,
Review the appraisal with your agent.
Question: How much are they putting down?
What does your agent say about the contingency?
Review your contract with your agent!
Was the appraisal cont. included in the 17 day time period?
Steven Abraham
lagunacastles@cox.net
http://www.stevenabraham.com
0 votes Thank Flag Link Mon Jun 1, 2009
Why would a crooked loan officer be motivated to have a low appraisal possibly scuttle the deal? If the loan officer has pull with the appraiser he would urge him to hit the number.

Now if the appraiser and the buyer are golf partners then maybe you're on to something. But it can't serve the loan officer's interest to have this hiccup I don't think?
0 votes Thank Flag Link Mon Jun 1, 2009
You say that the buyers signed off on all contingencies. Make sure that the form that you have shows that they signed off on the appraisal contingency, if it was part of the original purchase agreement specified on page 1, as a contingency.

We can't determine if it was rigged or not, while it's tempting to think so, you have the right to cancel the contract, rather than lower your price. However, you are risking another buyer coming in lower in this market.

FHA lenders are the only ones allowed to be selected by the loan broker, and not by an independent source. Assuming your next buyer would be using FHA, then they will be seeing the same appraisal valuation as this one, if your home is sold within the last 3 months. Also, the FHA case number for your house need to be transferred to the new buyer.

It might be best to provide more realistic comps to argue with the appraiser, than any other alternative. Folsom is more challengin to appraise, in my opinion, because it needs to be done by neighborhood and not just by a radius around your property. That might give you a position. Otherwise, you might want to think harder about just accepting the lower price. ...not fun!

Good luck!
Web Reference: http://www.suearcher.com
0 votes Thank Flag Link Sun May 24, 2009
I was not talking about how far back they go for comps. I was talking about how long the FHA appraisal stays with the property. It's possible that it's only 3 months. That would certainly make sense since they only look at properties that sold up to 3 months ago. The bottom line is that the FHA appraisal stays with the property for a period of time and if another FHA buyer comes along in the next few months, just getting a new appraisal and hope for a better result is not an option. I am sure the seller does not want to wait another 3 months for a new buyer as the property value will most likely go down in the next three months. Not sure if the seller wants to limit the pool of potential buyers to only non FHA buyers. If you want the highest and best you may want to stick with the current buyers as they are most likely the highest and best for now.
0 votes Thank Flag Link Sun May 24, 2009
Ute Ferdig -…, Real Estate Pro in New Castle, DE
MVP'08
Contact
If they released all contingencies, including finance and appraisal, then yes, you keep the deposit.
0 votes Thank Flag Link Sun May 24, 2009
As Robert mentioned, now the loan agent can only select the appraiser when an FHA loan is involved. Just for your info, FHA appraisals stay with the property for I think 6 months. Thus, assuming you can't come to an agreement with the current buyers, if the next offer also involves an FHA loan, you are stuck with the first appraisal.

As already mentioned, if the buyer's loan is not an FHA loan, the appraiser was most likely not picked by the loan broker. However, even assuming the loan broker got to select the appraiser, it's really highly unlikely that the appraiser would put his license on the line and intentionally come in low, especially if it's just a few thousand $$. These days, it's not unusual for an appraisal to come in below the purchase price. The appraisers have to apply acceptable valuation principles and they are accountable to the lenders if they come in too high. The appraiser has nothing to gain from keeping the value artificially low as the appraiser gets paid no matter what and appraising the property below contract price just puts the whole transaction in jeopardy and the loan broker would not want the appraisal to come in lower. If the loan broker wanted to influence the appraiser, believe me it would be the other way around to ensure a closing as opposed to coming in lower which just creates problems.

I am not sure why the buyer would have removed all contingencies with a low appraisal. Are you sure the buyers removed all contingencies, not just the inspection contingencies? If they indeed removed all contingencies, you'd be able to keep the earnest money deposit to the extent that it does not exceed 3% of the purchase price as that's the maximum for liquidated damages.

If I were you, I'd think very carefully about letting this buyer go over a few thousand $$. Chances are, the next offer will be lower than what you have now unless you have at least one solid backup offer in the wings. I understand you are not happy about the appraisal, but you need to set emotions aside and not be guided by unsubstantiated suspicions.

Best of luck to you.

Ute Ferdig
Web Reference: http://www.themlshub.com
0 votes Thank Flag Link Sun May 24, 2009
Ute Ferdig -…, Real Estate Pro in New Castle, DE
MVP'08
Contact
As said below, appraisals can come in conservatively these days. You may have the same problem with the next buyer.

Conventional and VA loans are ordered through a system with the loan officer has little to no contact with the appraiser. FHA loan appraisers can still be picked by the loan officer.
0 votes Thank Flag Link Sat May 23, 2009
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