Home Buying in 95823>Question Details

Milan, Home Buyer in Sacramento, CA

We've made an offer of 190K on a bank owned property that was listed for 169K and got accepted.

Asked by Milan, Sacramento, CA Fri May 30, 2008

However,
when applied for the loan, our bank's appraiser only appraised it for 165K. We were in the middlge of negotiating stage with the seller, but today the seller's agent said the bank may take it back and auction the house instead of selling to us. Can they be legally do that even if we agree to pay for the orginal offered 190K price? We have the signed addendum and good faith deposit. We really love that house. Please help advice.

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Why would someone want to pay twenty something thousand more for the property when it was appraised for so much less. Question of the pros.
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Because they want it and they think it's something other people will want also. Why would someone pay more than list price for a new car? They do in some instances.
1 vote Thank Flag Link Sat May 31, 2008
I saw this great article explaining REO's and how to get the best deals here http://www.crystalclearmarket.com/?p=181

It teaches you what an REO is and how to get the best deals.

Hope this helps. Good luck to you.

Elliot Lau, Realtor of 22 years.
1 vote Thank Flag Link Sat May 31, 2008
Why would someone want to pay twenty something thousand more for the property when it was appraised for so much less. Question of the pros.
1 vote Thank Flag Link Sat May 31, 2008
Yes, the bank can do that. They are the final decision maker.

You said this is bank-owned. So presumably, you are negotiating with the lender (as the Seller), right?

The listing agent can appeal to the negotiator to postpone selling the property at auction if they can show the strength of your offer. If the property is appraised for $165K --- could you amend that offer to be at that price, or were you trying to get credits back for closing costs, etc when you wrote an offer for more?

I am also wondering what it was that you were negotiating with the seller/lender. Sounds like this "negotiation" as well as the higher offer-than list may have actually delayed the process for your offer to be accepted by the lender.

If you are unable to complete this purchase, consider it a lesson learned. When dealing with REOs, keep it simple, make it easy to process, no credits, AS IS.
1 vote Thank Flag Link Sat May 31, 2008
Hi Mylinh,
Without seeing all the documents it is impossible to say for sure. It sounds like you have a deal at $190,000. The bank is only going to lend you an amount based on their appraisal of $165,000. As long as you have the cash to make up the difference you should be able to do the deal. If you don't have the cash and withdraw your offer and try to redo the purchase at a lower price the seller (bank) has the right to walk away. I hope this helps. Good luck, Walter
Web Reference: http://ocnorth.com
1 vote Thank Flag Link Fri May 30, 2008
On a bank-owned property the bank can essentially do what they want. Your signed documents are between you and the seller, not between you and the bank. Anything you and the seller sign is dependent upon bank approval. Unfortunately, lenders can make the short sale process a bit of a nightmare. You'd think they'd want to get the property off their books, but sometimes it doesn't appear that way.
1 vote Thank Flag Link Fri May 30, 2008
Hi Milan,

You can always question the comps that the appraiser used - especially if they are an out of town appraiser. Generally, bank are very careful about the list price. They have an appraisal and sometimes 2-3 broker price opinions to support the price. They won't list for more than it's worth because many people have to obtain financing and they know they will run into appraisal issues.

With many of the banks that I have worked for, they started rejecting offers that were way over asking price for this very reason. They know it won't appraise and many agents started using this strategy to snag the property in a multiple offer situation and then ask for a price reduction later. Accordingly, if the bank *did* accept a well above asking offer, they included an addendum to the sale that if it did not appraise the buyer was responsible for the difference.

A house is worth what someone will pay for it. Many people may chime in and ask why you would "over pay," but it may the perfect home for you and your family - a long term investment. If you were going to stay a short while or flip the property, I would advice against it as values may be down for some time. If it is your home, however, and it fits everything you are looking for in a home, it may be worth it to *you* to come up with the difference.

Bottom line is it is not illegal for the seller to cancel the contract if you cannot purchase the property at the price you agreed to -$190k. They don't care where the money comes from - your bank account or via your loan. If you didn't sign an addendum stating responsibility for the difference in appraisal price, try to renegotiate. I would also find out about the appraisers territory, comps used, etc. Your agent can also review comps to make sure your offer price is in line for financing.
0 votes Thank Flag Link Wed May 5, 2010
I'm in the same position. But to answer a question posed "why would you pay more for a home than what the asking is?" We offered $14,000 above asking for a home and at that time there was no other offers. We loved the home.
But with our situation which is ongoing is we cant get a signed contract. We keep agreeing and signing the addendum the bank requests without negotiation, giving them everything they are wanting and two months later we're still waiting. Here in California with the price of homes still falling (some we've looked at are now $80,000 below their original asking) I can't see why this bank hasn't jumped on a sure deal. Very confusing.
0 votes Thank Flag Link Sat Jul 5, 2008
you can only get a loan for the appraisal value??? Why would you want to pay more than it's worth??? I guess if you really love it and have the cash, go for it. But, if they take it to auction, you will probably buy it for less. To answer your question, if you can execute on the contract, the bank must also.
0 votes Thank Flag Link Fri Jul 4, 2008
Question to you is; Do You Have the Difference to Pay ?

I'm confused why you overbid on the property ?

Were there other buyers you were competing against ?

The bank deserves to take it back if they are refuse to accept
a $165k offer.
Web Reference: http://AskNancyG.com
0 votes Thank Flag Link Fri Jul 4, 2008
When you talk about the seller and that they bank may take the property back and auction it, the property does not sound like a REO (aka bank owned property). It sounds more like a short sale or a pre-foreclosure type sale. If this is true, your offer HAS NOT been accepted if the homeowner approved it and the bank has not. With the appraisal being so much lower than your offer, I'd say that you should WITHDRAW your current offer. Then you need to decide if the house is worth waiting for. You could try submitting a new offer, but your best bet is to wait until the property returns to the market as a true REO. You should be able to get the home at a better price.
This is what I did and got the house for 6% lower than my offer at the short sale.
Good Luck!
0 votes Thank Flag Link Sat May 31, 2008
Jennifer Kre…, Home Seller in 95124
MVP'08
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