Mayraoxy0, Home Buyer in 80221

I am in the process of buyin a house. What happens if the house is appraised at lower price than what seller wants for it?

Asked by Mayraoxy0, 80221 Thu May 17, 2012

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Galen Malenke, Agent, Denver, CO
Thu May 17, 2012
To answer your question specifically. Several things can happen.
1. The low appraisal can terminate the contract and you look for another home
2. You can pay the difference in cash and complete the transaction
3. The seller can lower the price to meet the appraisal-the best option for you
4. You and the seller can negotiate a compromise ie; split the difference with the seller
5. Pray about it-It's amazing what God works out for us when we trust Him.

Blessings on your transaction
Galen S. Malenke, Realtor
Galen Malenke & Co
2 votes
Good answer Galen. Prayer changes things. Even in real estate. I've seen it myself.
Flag Thu May 17, 2012
Joetta Fort, , Arvada, CO
Thu May 17, 2012
If this house is, in fact, overpriced then be thankful you didn't get caught in a situation you might regret. The market is still shaky enough that overpaying for a house is a big mistake.

But if you've seen several homes, and you know based on your own viewings that the house is priced well, and your agent concurs, it's time for your agent to get to work on the suggestions others who answered in this thread before me have already explained.

Some agents are saying the problem is that prices are going up and appraisers aren't keeping up with that fact. But prices are only going up in some areas, maintaining in others, and still dropping in others.

What are your own thoughts about the price of this house? If you feel it's worth it, then it's time to fight for it until all options are exhausted.
1 vote
This lady's spot on. Don't let yourself be railroaded.
Flag Thu May 17, 2012
stephen holb…, Agent, denver, CO
Thu May 17, 2012
More than likely the appraiser didn't use market based comps. Appraisers are not independent in thier decisions anymore thanks to our good friends in DC (think Andrew Cuomo and FHLMC). An appraiser is picked by an "APPRAISAL MANAGEMENT COMPANY" that is more often owned by the bank from which one applies for a loan, and is used as a profit center. By that I mean they charge you several hundred dollars for an "appraisal" and then put the job out to bid to their stable of appraisers, and put the difference in their pocket. The one who bids lowest gets the job wether or not he/she is experienced or knows the market. All too often, too, they are told what direction the banks wants the appraisal to go depending on how much other business they think they can get from the customer or the brokers involved. If there are brokers involved, they should have given the appraiser the comps on which the price was determined, and made sure the appraiser had the necessary experience to do a correct appraisal. First see if that was done before there is any negotiations on price, and if the comps used were bad, demand a revision using only market based comps.
1 vote
Ray, , Denver, CO
Thu May 17, 2012
I have had this happen 3 times in the last 2 months. As a lender I can tell you this much. Appraiser's have to appraise the house with the best data available. If the agent selling the house compared the house for sale incorrectly this could cause problems, when they list it for sale.

Underwriters when reviewing appraisals can ask for a review if they are alerted there is a value issue. This will come in form of a review, either desk or field review. A desk review is when another appraiser independent of the original, reviews the work of the original appraiser. A field review, is when they request another appraiser to trace the work of the original appraiser.

All of this is tied to the investor who buys the mortgages. They can call out the underwriter if this was taken lightly, and basically say they disagree with the value when they go to buy the loan for servicing. This is why underwriters will ask for reviews on appraisals.

At no time can a lender order a new appraisal , just to get a better value.

Long story short, we had 1 deal fall apart, 1 deal where the buyer brought a bit more to closing (but the purchase price was reduced by the seller), and one deal is active right now.

Ultimately, you need a strong buyer's agent or selling agent (if you are selling you're home). It is imperartive that proper data be used to list a house for sale, and a buyers agent make sure it is a good value on the house you want to buy. You also need a strong lender who can review appraisals in instances like this and work together with agents to present better data in times where the value comes in low. It is not guaranteed that the appraiser will change the value, but if you pull apart the appraisal comparable sale by comparable sale, and adjustment by adjustment, you may be able to find flaws in the appraisal. This is how you can get an appraiser to make changes.

If nothing works, then follow Robert McGuire's advice as well, since he is a strong agent .

To your success~

Ray Williams
Branch Manager
Summit Home Mortgage
303.779.0591 x101
1 vote
Robert McGui…, Agent, Denver, CO
Thu May 17, 2012

That eventuality is spelled out in the contract to buy and sell. Have your Buyer's Agent go over that with you. Basically, if it does not appraise - 1. You can terminate the contract and walk away. 2. The seller can reduce the price with an amend/extend and proceed forward (or you can split the difference). The other option is that you bring the difference to the table to make the transaction work. We are at times experiencing low appraisal issues with the rising prices and new and stricter appraisal rules. This is one of the many reasons why you need a good and experienced Buyer's Agent to look out for you best interests, and work through the maze to get you to a successful closing. Best of success to you.

Robert McGuire ASR
Your Castle Real Estate
1776 S. Jackson St. #412
Denver CO 80210
Direct – 303-669-1246
1 vote
Suz A, Agent, Longmont, CO
Mon May 21, 2012
Amy Hoak of Marketwatch covered this topic.

There are two main justifications for an appeal, William Fall, chief executive of the William Fall Group, a national appraisal company said: Either the appraiser neglected to consider similar, recently sold properties in the final value, or the appraiser made a significant error or omission in reporting characteristics of the property that could affect value.

But remember, to make the case that a home improvement should have been considered in the appraisal, it has to be shown to be a major capital improvement, such as a new kitchen. It's a good idea to save records of these upgrades as proof.

The important takeaway from this article is consumers have a right to appeal.

No, I personally haven't done this. But, I have been successful in making a case with the lender. As the market has become a seller's market along the Front Range, the lender might be impressed to hear that there is a lot of interest in a particular property. Bolstering confidence in the market may take a while. By summer's end, things could improve.

0 votes
Rachelle M P…, Agent, Denver, CO
Mon May 21, 2012
I'm finding the current market and the way appraisals are done now is causing a lot of this. You are protected by the contract here and can cancel based on this if the seller is not willing to drop the price. Good luck!

Rachelle Paplow
Cherry Creek Properties
(720) 839-2659
0 votes
Bob Gordon, Agent, Boulder, CO
Fri May 18, 2012
Hi Mayraoxy0 - The appraisal provision is for your protection. If the value negotiated between you and the selling party is not justified, this is an opportunity to renegotiate the terms or cancel the contract.
0 votes
Jannett Grah…, , Denver, CO
Fri May 18, 2012
The problem is the seller here..does he/she want out of the property quickly or can they wait for an upturn in the market?! wishful thinking right?
Personally, I would be inclined to work with a rent to own strategy..this creative method allows the seller to the get full asking price, in return for an agreed upon future date for payment. Naturally, getting some money NOW to move along with while having a motivated renter/buyer insitue who is going to look after the place and more often than not, improve upon its maintenance.. A Win-Win-Win I'd say as the realtor also gets paid.
0 votes
Mike Papanto…, Agent, Arvada, CO
Thu May 17, 2012
Galen had the right answers. Pray about it might have been the best of them! But, your options are items 1 through 4 in his list of things that can happen.
You may want to have your agent suggest to the seller's agent that they have a packet of comparable sold listings and recent market inteligence for the neighborhood that the agent can actually give to the appraiser. The seller's agent should be contacted by the appraiser ahead of the appraisal date and that is the time to arrange to meet them at the property at time of appraisal and hand them the packet.
It's worked for other agents in the past and may work in your case. It's always hard for one agent to tell the other how to do their job, though.
0 votes
Mayraoxy0, Home Buyer, 80221
Thu May 17, 2012
Thank you all very much. I am a little worried because house was listed at 165,00 and appraised at 140,000. I dont know if seller is willing to drop price by 25 k. I will definitely use all of your advise.

Thansk again!
0 votes
With any luck, you are using an FHA loan. If so, your Realtor will point out FHA appraisals stay with the target property for six months and you should have some great ammo to convince the seller to reduce the price.
Flag Fri May 18, 2012
Patrick Murr…, Agent, Greenwood Village, CO
Thu May 17, 2012

Well, the lower appraised value can be a deal breaker if Seller doesn't agree to value or if you can't meet on terms for the difference. This is where your Agent should come into play and negotiate w/ Listing Agent on handling this value obstacle. Hopefully, for your concerns, the Seller agrees to lower sales price. Best of luck !

Patrick Murray
Home Real Estate
Web Reference:
0 votes
Colleen Mull…, Agent, Aurora, CO
Thu May 17, 2012
Three things can happen (1) The seller can reduce the price to the appraised value - this is normally what happens (2) You can bring the difference between the purchase price and appraised value in cash (3) Either party can terminate the contract.

Hope this helps!
0 votes
Cory Fitzsim…, Agent, Golden, CO
Thu May 17, 2012
Common issue in today's real estate. Many times it depends on the appraiser and the comps they use. Appraisal can be a sticky matter in the negotiation process. Recently, I had an apprasial come in way low because he would not use another county (1 street over) in the comps. Instead he used comps 5 miles the other way versus the comps two blocks away. Robert is correct in your options, talk it through with your Realtor and ask the listing agent to provide the comps they used to assess asking price. Good luck.
0 votes
I thank you all for the helpful information. Now, I know what to pray for specifically.
Flag Tue Sep 10, 2013
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