You can dispute the appraisal and pay for one yourself (sort of like getting a second opinion). In this market, appraisals are not being overly inflated as they may have been in the height of the market a few years back.
Sorry to burst your bubble but you're getting opinions that are very similar and home owners find it difficult sometimes to digest market trend information since there is a lot of "pride in home ownership" that comes with this territory. However, banks don't care about the emotional side of this business, they only want market facts that support what their risks are when lending to a buyer.
I agree with the others. The banks have to protect themselves in a falling market. A year from now that house may be worth only 90% of its current appraised value.
Some info off of MSNBC June 8, 2008---
Cape Coral/Fort Meyers, Fla.---
This area boasts sandy beaches and the laid-back lifestyle that has attracted snowbirds and even luminaries such as Thomas Edison and Henry Ford, who made the area their vacation spot. But it's also been hit hard by the housing crisis. Home values have plunged and foreclosures have jumped a whopping 442% since 2006. It is on Local Market Monitor's list of overpriced markets, with a 34% difference between actual prices and equilibrium; its counterpart to the south, Naples, comes in at No. 1.
Median price end of 2007: $225,300
Median price end of 2006: $258,900
Percent change: - 13 %
Projected change through Q3 2008: - 17 %
Foreclosures in 2007: (1 for every 24 households) 12,880
Foreclosures in 2006: (1 for every 132 households) 2,375
Change in foreclosures: + 442.3%
If it were my money, I wouldn't be making loans on homes there without 30% down.
A bank will not finance a buyer for any amount over the appraised value of a home. That is correct. The appraisal is completed to determine actual value which is what the bank uses to configure their lending liablilty. If your sales contract is for a higher amount, a few things can happen...
1.) You and the buyer can re-negotiate your contract to lower the price to appraised value.
2.) You, at your expense, can order another appraisal and dispute the original appraised value (only disputable if the second appraisal comes in at a higher value).
3.) The buyer can choose to pay the higher price but will have to come up with the additional money above the appraised value (something that happens in very HOT real estate markets with multiple offers).
4.) You can terminate the agreement and look for another buyer.
Rarely do I see a buyer pay a price above the appraised value. Once a buyer knows the contract price is above the appraised value, they expect some re-negotiations. Their thought is... "why would I want to pay more for a house than it is worth?"
The criteria an appraiser uses to determine value is of SOLD (not pending) comparable properties. If the Fort Myers market has picked up a bit (I know nothing about your market area) then it MAY be reasonable to wait for a few other sales to close which could bring the values up a bit and order another appraisal. Banks have put a lot of heat/pressure on appraisers to not stretch on their valuations in an effort to limit their liability. If they lend too much money on a house and that buyer defaults... they are left holding the note on a house that is worth less than the note.
Depending on the status of your market area (ask your agent about this)... there are a number of ways you could go. You are not alone. Low appraisals have become common place. Hope my answer clarifies for you! Thanks for Posting!
This is correct, I have owned a mortgage company and also am in real estate and this is very common. The bank will loan off the lower amount (sales price or appraised value). You must drop the sales price down to the appraised value or have the seller bring the difference of the 2 to closing. For example if you sell a place for 110k and the appraisal is 100k the seller must bring in 10k to cover the difference. The seller must also now put down a down payment on the home, the 10k does not count. If you have questions or want to bounce anything off if my, please feel free to contact me.