The appraised value came lower than purchase price by 15K? What will be the right thing to do in pleasanton area?

Asked by N C, Fremont, CA Mon Apr 12, 2010

Is this normal nowadays? The property is in plesanton. What will be the right thing to do - pay the purchase prices, ask the seller to adjust to newly appraised value, settle in between?

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11
Steven Ornel…, Agent, Fremont, CA
Mon Apr 12, 2010
BEST ANSWER
Hi NC,

You have tabled three good options in your question. Now, consider the following:

1) Is there an alternative property that meets your needs (alternate supply)?
2) How long is your planned occupancy period (the longer this period the lower the risk of equity loss)?
3) How much higher will your loan rate increase if you pull out of this deal and what will be the monthly increase (rate are moving up)?
4) Do you have time for a 2nd Appraisal?
5) Are you in a position to take advantage of both the Fed/CA Tax credits (are you positioning to get the combo $18K)?
http://www.trulia.com/blog/steve_ornellas_mba_re_mastersgri/…


If I were in your shoes and making the decision (obviously without the benefit of answers above) I would move forward in this order of preference:

1) Ask for sales price to be lowered to appraised value.
2) Split difference 50/50 or X/X (remember that the lender loans on the lesser of appraised value & contract price).
3) Request a Closing Cost Credit to shave off some cost.
4) Make up the difference, close, and start enjoying your new home!

Best, Steve
0 votes
Vickie Nagy, Agent, San Ramon, CA
Mon Apr 12, 2010
Hello NC,

If it's an FHA appraisal, it's can be complicated. FHA appraisers are reputedly a bit more constrained as they have to value per FHA guidelines. I've been told that the appraisal 'sticks with' the house, even if the buyer and seller can't come to terms, which could possibly work to the buyer's favor.

Respectfully,
Vickie Nagy
CA DRE#01363932
Keller Williams Realty
1 vote
Joanna Jensen, Other Pro, Livermore, CA
Sat Sep 25, 2010
Hi All,

It is important to know that the appraisal does not necessarily reflect the true value of the home...

My husband is a Loan Officer very recently doing a loan for clients in the area. His appraisal came in $100,000 less than a competative appraisal. Owner did two applications at once.

The appraisal is only as good as the appraiser.

Make your decision on how much you like the home. $15,000 is a small amount.

Can you easily afford the payment at current price? Reducing it by $15,000 will not affect your payment by much... Also your down payment wont be that much higher.


Several ways to look at is.

JoAnna Jensen Legal Assistant / Realtor

925 699 5041
0 votes
N C, Home Buyer, Fremont, CA
Mon Apr 12, 2010
Wow, I am impressed with the quality of answers from all of you. It makes very difficult to choose the "Best Answer".

Based on the information, I have clear picture of my options and the process. I really appreciate everybody who spent time to answer.

Thanks,
NC
0 votes
Barbara Wils…, Agent, Danville, CA
Mon Apr 12, 2010
You have a couple of options. You can pay the 15k because you love the house, the neighborhood, and you were willing to pay that price. You can ask the seller to lower the price by $15,000 because you have an appraisal contingency, and don't have $15k extra; if they don't comply, then you go find another house. You can ask the seller to lower the price by $15k because the bank won't pay that much and you don't have extra money. If they say no, then you go and find another house. Why aren't you asking your agent this?
0 votes
Brian LeBars, Mortgage Broker Or Lender, Pleasanton, CA
Mon Apr 12, 2010
Hi NC...

I would ask if your offer was written with or with out an appraisal contingency? If your loan is FHA indeed the appraisal is tied to the property for a 6mo period. If that is the case the seller will have to adjust OR put the home back on the market. If it is a conventional loan you have the options of switching banks or lenders. Let me know if you have any questions on how the financing is related to this specific situation.

Regards,
Brian
Web Reference:  http://www.loansquawk.com
0 votes
Pacita Dimac…, Agent, Oakland, CA
Mon Apr 12, 2010
I would look at this as an opportunity to negotiate with the seller.

First of all, you're in contract. And unless the seller wants to cancel the agreement, put it on the MLS as "back on market" (and raise other questions from prospective buyers) and start marketing all over again, the seller may be willing to negotiate.

If the seller won't budge, and if you decide to walk, even if there is a back up offer, unless that back up buyer is still available or is paying cash, that back up buyer may run into the same challenge of getting the property to appraise for what the offer is for.

You won't know if the seller will lower his price unless you ask.

You should strategize with your agent on the best approach. Put down how much the seller is "losing" for each month that the property doesn't sell.

Good luck!
0 votes
The Medford…, Agent, Fremont, CA
Mon Apr 12, 2010
@Dan:

"The house is sadly overpriced. Time for the seller to come to reality and meet the appraisal.”

Not necessarily. A low appraisal DOES NOT automatically mean the house was overpriced. We are getting a LOT of low appraisals in this are right now for a lot of reasons. The market is WAY different here than in Maine.


@Steve:

“Do you have time for a 2nd Appraisal?”

Good approach – we just appealed an appraisal that came in low and we won.


@Vickie:

“If it's an FHA appraisal, it's can be complicated.”

Very true – we see this a lot, unfortunately.

@N C:

Q: Is this normal nowadays?
A: VERY

Q: The property is in plesanton. What will be the right thing to do - pay the purchase prices, ask the seller to adjust to newly appraised value, settle in between?
A: Here is a post that may be helpful:

Missed It By THAT Much: Top Four Solutions To Low Appraisals
http://bit.ly/cuRmfY
.
0 votes
Dan Chase, Home Buyer, Texas City, TX
Mon Apr 12, 2010
You can not get a loan for that amount. The house is sadly overpriced. Time for the seller to come to reality and meet the appraisal.
0 votes
Doug Buenz &…, Agent, Pleasanton, CA
Mon Apr 12, 2010
The right thing to do depends on a lot of factors. How unique is the property, are there other available homes that are just as desirable, how badly you want to buy it, how badly the seller wants to sell it, and the quality of the appraisal. You might want to read the article I just posted last week on this very issue

http://www.680homes.com/blog/2010/04/07/the-appraisal-contin…

Good luck!

Doug Buenz
The 680 Group at Alain Pinel Realtors
Web Reference:  http://www.680homes.com/
0 votes
Michael Tess…, Agent, Fremont, CA
Mon Apr 12, 2010
This depends on the actual price and how much you want it. If I were your agent I would review the compareables with you and see how you feel about the value and also the apprasail too if we can get our hands on it. I would also see if either agent met the appraiser at the home when they came to do their inspection and did they provide comparable information to the appraiser. If not I would ask if the apraiser would accept other comps if your agent has any to provide them they may not have considered and see if they can get the value up. If all this fails it's time to negotiate with the seller. Depending on your desire for this home ask for a reduction to the lower value or spilt it 50/50 or some other formula it all comes down to how much you want your new home and how badly the seller wants to sell. I hope this information HELPS and good luck with your home purchase and welcome to Pleasanton ;-)
0 votes
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