What is your experience with banks lowering prices due to a low appraisal?

Asked by Caesura, Bristow, VA Mon May 18, 2009

We just got the FHA appraisal results back on a house we are trying to buy. It's a short sale, and the bank accepted our offer...everything was good to go until the appraisal came back $16,000 less than the purchase price. Of course, we can only get a loan for the appraised value now. This short sale has a 1st and 2nd trust, making it more difficult. In your experience, what are the chances they'll agree to sell it at what it appraised at? I know it would be stupid for them to not do that, because no one else is going to come along and offer them more than market value right now, but I also know that banks are fickle and often don't act in a way we would consider rational! Anyone have any insight? My realtor and I are just waiting to hear back, so I'm trying to gather some info in the mean time. I'm hoping that the purchase price will be lowered to match what it appraised at so we can move forward with this, but I am bracing myself for the worst if they don't come down at all.

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Bernard Brill, Agent, Clinton, NJ
Mon May 18, 2009
I have found that it is very much a local issue. If the bank is located in and around your community, they are more in tune to local conditions and environments and would be more likely and willing to go with the FHA appraised value as the offer. I have found “out of area’ banks are more rigid and less likely to compromise. I would also ask my agent to prepare an analysis of more recent sales (ideally in the prior 6 months and in proximity to the property) so you have the supporting data to substantiate your offer.
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Leslie Woods…, Agent, Ashburn, VA
Mon May 18, 2009
Dear Caesura,

This is a very differant market, The bank should agree to selling it at the appraised value, how ever we have had some that want what they are marketing the home for.
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Vicky Chrisn…, Agent, Purcellvile, VA
Mon May 18, 2009
Banks do not like to approve a lower offer than the first one they approved. However, they will look to their BPO/Appraisal - remember, they did one or more in order to approve your offer. If your appraisal is off from theirs, they may say no.... At which time I would hire a new lender and order a new appraisal rather than give up the house - assuming you do want to live there. Just tell the bank that's what you're doing and get then to agree in advance that if the second appraisal comes in low, too, that they will approve the sales price of the higher of the 2. That is so reasonable, that they will likely do it.

Appraisals are not scientific, and many are just plain wrong. Did you try to challenge the appraisal? Since you mentioned you have an agent, I am sure that the agent did that rather than risk losing the deal, right? I mean, if you agree with the appraisal, then it doesn't make sense to try to challenge it... but I am assuming that you and your agent think what you offered was reasonable based on the comps, otherwise you wouldn't have put in that offer, right?
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