What's the liklihood of a seller dropping the price if it doesn't appraise equal to or higher than the selling price?

Asked by SNH, Tewksbury, MA Wed Oct 17, 2012

I just signed the P&S and waiting for the appraisal. I know the property must appraise equal to or higher than the selling price in order to secure the mortgage loan but what happens if the appraised value falls short by $1-$5k? What are the chances of the seller lowering the price? This property was purchased by an investor five months ago and flipped it so I know he will profit in a big way. With winter around the corner coming to a close, I'm thinking the seller will meet the appraised price because I don't think the seller will want to take it off the market and wait till spring.

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Locke Haman’s answer
Locke Haman, Agent, Leominster, MA
Wed Oct 24, 2012
It's always difficult to predict what individual sellers will do, but the reality of the situation is that the buyers bank will not lend an amount over the appraised value, so if the seller refuses to lower their price they're going to lose the deal and would encounter the same problem with any other offer down the road.
1 vote
Christopher…, Agent, Tarrytown, NY
Mon Dec 24, 2012
Hi, It really depends on thes seller. Once you know the personality type you are dealing with then it's easier to guage. Since the seller in this case is a flipper you have a pretty good chance. Flipping is a business and the longer they hold onto the property the more they lose on their investment. Time is of the essence when flipping!

0 votes
Annette Law…, Agent, Palm Harbor, FL
Mon Dec 24, 2012
Larry provide exceptional advise.....RELAX!!

If the home was listed with FHA/VA financing accepted, the owner/investor should be adequately experienced to anticipate the scenario you describe. RELAX.
If however, the home was not listed with FHA/VA financing accepted, you have imposed thousands of additional dollars of cost on the seller in addition to a gamed appraisal.
If it were my listing, which would have appeared 'AS-IS' cash or conventional, you will need to pay in cash the difference in negotiated price and appraised value. I will have six buyers waiting for you to stumble or cause negotiations to be reopened.
There is much we do not know regarding your situation. However, experience suggests you can RELAX. Investors like to see happy folks moving into a home they just rehabilitated. Many are noble folks looking to match beautiful homes with deserving home seekers.
Merry Christmas.
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Mon Dec 24, 2012
Seller never like having to drop their price and some refuse to do so , however thee Sellers are generally delusional. Investors owners who are flipping are likely to be irrational, if the home appraises for less than your contract my guess is they will meet the appraised value and move on. If you're getting an FHA loan then this appraisal is legally on record for 6 months and the Seller must disclose it

I would relax, enjoy your holiday and see what happens.
0 votes
Bill Eckler, Agent, Venice, FL
Mon Dec 24, 2012
With a scenario as outlined, it would seem that there should be room for the seller to move if the property doesn't appraise but this will come down to his/her level of motivation. This is usually tied to a number of factors including the amount invested, their need to move the property(perhaps for another investment), personal needs, etc.

Today more than ever, listing agents need to take great care when assigning "asking prices" to property because as you are finding, if financed, they must appraise to avoid complications.

No point in worrying until the numbers come in.....I like your chances!

Good luck,

0 votes
Chris Doherty, Agent, Lowell, MA
Mon Dec 24, 2012
This is a case by case basis. If your appraisal is low then the next buyer may experience the same problem, so it may compel a reduction.
0 votes
Jeff Kremers, Agent, Jenison, MI
Fri Oct 19, 2012
Sellers get put in a tough spot if the house doesn't appraise and almost have no choice but to drop price unless the buyer has a large down stroke and the difference can be worked out between the two.
0 votes
ListTrue, Agent, Grand Rapids, MI
Wed Oct 17, 2012
Great question on price dropping. I've had it go both ways. However in most cases the seller will agree to drop the price if they can. Some sellers are still underwater and they cannot. And sometimes the buyer will want the house so bad that they will come to the table with the extra money needed to close. That being said it is highly unlikely that the investor won't drop the price. I wish you the best!
0 votes
That's what happened to me with a previous property. The appraisal came in very low, $20k lower. I really wanted it and offered extra money (at least a quarter of that amount) and the seller didn't drop an inch so the deal fell through. Throughout the whole process though the seller appeared to be anxious to sell and was ready to move. Unfortunately, the property is still not sold and has been on the market for 90+ days with no drop in the price. Seems odd to me.
Flag Thu Oct 18, 2012
Kalyn Ringwo…, Agent, Cary, NC
Wed Oct 17, 2012
I can't see someone maintaining the price if the appraisal came in under the list price. Unless there was something extremely unique about that property and it was a seller's market, chances are they will have to come down on the price or risk not having that property sold for a very long time. Plus with it being an investor they care more about moving the property asap. In the end it would cost them more to wait on 1000 than to lower it.

0 votes
That's what my realtor thinks too! She thinks the seller will come down if it does appraise lower and she doesn't think it would appraise too low off the list price. I saw on Zillow that this property has an estimated value that $2k higher than the selling price but I'm not sure who reliable Zillow is with their estimates.
Flag Thu Oct 18, 2012
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