Difference between appraisal and underwriter's valuation - any recourse?

Asked by Tracey Sedinger, Greeley, CO Wed Jan 1, 2014

My parents are attempting to buy a duplex in a suburb of Buffalo, NY. After they made an offer (which was accepted), the house was appraised for $8000 less; my parents and the seller came to an agreement so that the purchase could move ahead. However, the underwriter has just determined that the house is worth $20,000 less than the appraisal (approximately 8.5% less). Since the house is a duplex and the underwriter is interested in sales less than a year old, comparables are limited - and there are no comparables in this particular town and school district. The underwriter relies primarily on two comparable sales, one in a high-crime area (and both are in school districts that are mediocre at best). I don't know how relevant this is, but my parents are putting 20% down and have very high credit scores, with virtually no consumer or other mortgage debt. What options do they have (other than putting down the extra $20,000)? Thank you.

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Joe Sorrenti…, , Buffalo, NY
Wed Jan 1, 2014
Tracey:
If your parents are using a Realtor to purchase the property, that Realtor may be able to refer them to another lender in the area. If you have any questions, you can call me direct at 716-998-5637 but, if your parents are using a broker I cannot talk to them about the transaction by State Law.

Your parents should have a Real Estate attorney handling the transaction who may be able to guide them better especially if the lender they are using was referred to them by the buyer agent or if the buyer brokerage is affiliated with whatever company they have applied for the mortgage with.

Do your parents have a copy of the Appraisal? They should be entitled to it especially if they paid for it.
If you would like to e-mail me, my e-mail address is joe@716sold.com

Joe Sorrentino - Associate Real Estate Broker
MJ Peterson Real Estate
Direct - 716-998-5637
Office Toll Free: 888-807-1715
0 votes
Joe Sorrenti…, , Buffalo, NY
Wed Jan 1, 2014
Please clarify;
By appraiser, you are referring to a Certified Appraisal ordered by a lender to determine market value of the subject property correct?
By underwriter you are referring to someone who has placed a value on the property for the purposes of issuing hazzard (Homeowner's) insurance, correct?

Please clarify.
0 votes
It is interesting that the lender's appraiser did not give the same evaluation as the underwriter's. It would make since that the latter gave a smaller value. The insurance company probably wants to minimize their liability. Likewise, the lender probably wants to maximize the loan amount. Maybe the true property value lies somewhere in between.

http://www.propertyvaluers.com.au
Flag Tue Jan 27, 2015
Yes to the first. I think the underwriter involved is the underwriter for the mortgage, not for the insurance. From what I understand, a mortgage company official in Albany has reviewed the appraisal, and has rejected its valuation, arguing that based on 2-3 other "comparable" properties (duplexes in Cheektowaga and Hamburg) that the property my parents wish to buy is worth $20,000 less that what the appraiser thinks.
Flag Wed Jan 1, 2014
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