Is it typical for the seller's side to be nonresponsive when the appraisal is lower than the offer price in hopes that we terminate the contract?

Asked by Sy Nguyễn, Chicago, IL Sat Feb 12, 2011

The appraisal came in lower than the purchase price, and of course, our contract has mortgage and appraisal/purchase contingencies, and the seller waived their right to provide lending. When the appraisal came in, our lender immediately contacted us, and we immediately contacted the seller. The only information we've received is that they intended on giving our side more comparative data to get the place more accurately appraised, but our lender's appraiser has yet to receive any information. Just using Trulia myself, I was able to come up with many listings in the area (sold and for sale) that could be used as comps, aside from those used in the appraisal.

Is it typical for the seller to hope that we terminate the contract (per our contingencies) rather than renegotiate with us? I'd rather know that they are inflexible and tell us up front how they feel about the situation rather than no response. Is this a common tactic in the industry when the appraisal comes in less?

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Ranj Mohip, Other Pro, Chicago, IL
Thu Feb 17, 2011
This happens a lot. You and your agent thought the offer was fair when you made it--I'm sure you looked at comps before submission. You can give your appraiser the additional comps if you want the property badly.

The information in this answer provided by Attorney Ranj Mohip is general information and is not intended as legal advice, nor does the attorney intend to create an attorney-client relationship with any reader by answering this question or otherwise contributing as a member of
3 votes
Wayne Beals, Agent, Chicago, IL
Tue Feb 15, 2011
I can't tell you how many times we've been in this situation of the past couple years, both on the seller's and the buyer's side.

I'm not privvy to the details of the deal, but typically, outside of presenting the appraiser with additional comparables for consideration, there's not much for you to do. You can ask the seller to reduce the purchase price to accomodate for the appraisal. In the event that they do not wish to proceed at the reduced purchase price, there's not much more to do but terminate the contract and move on.

Another point of interest. If you were applying for an FHA mortgage, the appraisal may not go away for 6 months, whoever the buyer is, as long as they are applying for an FHA loan. Check with your lender on this, but if it is the case, let the seller know, and this may further influence them to take you reduced price (if possible). Bottom line, except for a faulty appraisal, the value is the reality of what a mortgagor is willing to lend. If the seller chooses not to sell at the reduced price to you, they may have to wait more time for a new contract, only to have the same problem.

That brings us to another point, the seller will react in their own perceived best interest. Perhaps at the new price the seller is short, or doesn't leave the closing with enough to make them jump. They may be investigating alternate strategies such as rental. Then again...they might just be in denial and are waiting for you to change your offer to cash.

Wayne Beals
Keller WIlliams
312 77BEALS
312 772-3257
Web Reference:  http://WWW.WAYNEBEALS.COM
1 vote
Suzanne Hami…, Agent, Orland Park, IL
Sun Feb 13, 2011
If it is a bank-owned or government-owned property, they don't care what the appraisal comes out, they will generally just wait for someone else. An individual seller may feel the same if they can't or won't reduce to accomodate the appraisal. And unfortunately, silence may not be a tactic, but may be the unprofessionalism of the selling agent involved.

One option is your lender could challenge the appraisal or order another appraisal, but the lender must be willing to do so. In your area, as a result of many foreclosures, appraisals are greatly affected by that. There is a new formula to consider short sales and foreclosures that appraisers are supposed to be using, I have heard.

It is frustrating for all, but your agent should be providing the lender with the fuel to fight the comps. Trulia unfortunately is not something lenders or appraisers will usually consider - must be MLS.

As you can see by the other comments, appraisals are a big problem in this industry right now.
0 votes
Matt Laricy, Agent, Chicago, IL
Sat Feb 12, 2011
In this market, a lot of houses are coming in under appraised. I have actually ran into this a few times. What the selling agent should of done before (and should really do now) is provide the appraiser with comps justifying the purchase price of the sale. It never hurts to give too much information to an appraiser. Now that it didnt appraise out, you have a few options. You can walk away, and the deal can be dead and you will get your earnest money back. You can see if they will look at new comps and order another appraisal, or you can come out of pocket for the difference. (which is the worst option) Most likely, if you really like the house, you want it to appraise out. If it is really worth the price, get on your agent to contact the selling agent. Have your agent provide comps to them. Have them call the loan company, get a hold of the appraiser, and have your agent try to do everything possible to prove your case. Hopefully this will all be resolved. Best of luck!

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
0 votes
David Hanna, Agent, Chicago, IL
Sat Feb 12, 2011
Hi Roger- as you can see, appraising in this market is a less than perfect science. Some great advice in the other posts, and ultimately this is now as much a legal/attorney issue as anything else in terms of the contract.

There is nothing that prevents you or your agent from contacting the appraiser and presenting the comparable sales you feel justify the price you have offered. as a buyer's agent, we always counsel the brokers and salespersons in our offices to be sure they bring data to support the to the listing agent and ask it be passed on to the appraiser.

Trying to discern what is happening on the other side of the table is difficult. I doubt the seller expected this, it is far more likely they have been feeling the pricing was too low. There are only two real solutions to this if the sale is going to close: either the appraisal is revised to the satisfaction of the lender and the price is justified, or the parties to the contract will need to decide how the difference in the value of the appraisal and the contract is going to be paid at the closing.

We have seen appraisals revised, and we have seen those attempts rebuffed. If you feel this is the house for you, do not hesitate to have your agent or yourself contact the appraiser. While your loan officer is not allowed to have this conversation, they can provide the contact information to you.

0 votes
Evelyn S. Fr…, Agent, Chicago, IL
Sat Feb 12, 2011
Hi Roger,

Good points mentioned here and all valid. You as the buyer are in the drivers seat & should be talking to your attorney regarding either extensions or moving onward. The only other scenario I can think of is if it's a short sale.

Is this a short sale? If so, it is possible that the sellers agent has contested the BPO (appraisal), compiled a new comparative market analysis (CMA) and is awaiting a response from the sellers bank for a new appraisal, which may take a while.

That being said, if this is the case, they should inform you if they want to keep the deal alive.

Good luck & talk to your real estate attorney, that's the best advise anyone can give you.
0 votes
Vince Milito, Agent, Chicago, IL
Sat Feb 12, 2011
This is not common but they also have no obligation to renegotiate because the appraiser apparently botched the report. Appraisals can be very subjective at times and the quality of appraisers varies greatly. Unless the appraisal price is preventing you from getting the loan you can and probably should move forward buying the home. You and your agent obviously already did your homework and were happy with the price so why let some random report change your mind? You didn't mention the price difference in the two or the purchase price but it sounds like the difference was relatively small. The appraiser is not smarter than the market and if you looked at enough places and reviewed enough sales to feel comfortable about your purchase you should move forward. The market is determined by buyers like yourself negotiating with sellers to agree on a price. If you liked the price before you should still like it now.
0 votes
Philip Sencer, Agent, Chicago, IL
Sat Feb 12, 2011
If you used one of the standard contracts approved by the State of Illinois, if the appraisal comes in short of the price you have the right to walk away from the contract and get your EM back. However there usually is a time frame for you to make that decision and it needs to be communicated via your attorney to make it official. It's your attonrney who you should be speaking with about what to do and you need to do it fast! Forget trulia or zillow or anything else. The lender only cares about what the appraisal says and nothing else matters!! Another option you have is to give extra $$$ to make up the difference from what the appraisal is (which is the maximum the bank will lend you) and the purchase price........which is probably what the other side is hoping for (praying). Yes, the seller is nonresponsive hoping that you want to proceed with the contract anyway.
0 votes
John Walin, Agent, Libertyville, IL
Sat Feb 12, 2011
What I have here is not legal advice, I am surprised your agent and attorney cannot address this concern. The ball is in your court as a buyer until the mortgage contingency waiver date. YOU as the buyer waive the mortgage contingency, not the seller. So if the mortgage waiver date was last Thursday, Did your attorney ask for an extension when the seller was notified of the below sales price appraisal? if the seller is unresponsive now, I suspect the waiver day is passed and in effect waived the mortgage contingency. What is the seller to do? Offer to match appraisal after the waiver date? No, it is your side's responsibility to keep track of the mortgage expiration time frame and request the price be modified to match the appraisal. My concern if I were you is that the waiver date has passed and you waived your mortgage contingency and now need to bring more money to closing, (since loan amount is based on appraisal) or risk default on the contract and loss of earnest money. You cannot renegotiate the contract if you violated the time frame.
0 votes
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