I recently asked this question: I just received the appraisal report from the buyers agent and its 15k below

Asked by Brenda, Laurel, MD Fri May 23, 2008

the contract price. The
appraiser used a foreclosed property and omitted sales that were located closer and closer to my home. He also omitted counting a bath . I have 5 days to decide if I will lower the price or the contract is void. Can I ask for a second appraisal? I am in the DC area.
Based on responses, I obviously did not include enough information for a good response. More facts: The appraisal was done as the final step to selling my home. The buyer ordered it. I am selling the home myself - no agent. The property was originally on the market for 389K and reduced to 374,500. Buyer offered 360k and asked for 11k closing help. This deal puts me 9k out of pocket. There are 4 properties within a half mile that have sold since December- sold for 355 - 380k. The TH not included and in question sold on 1/31/08 and is similiar to mine with the exception that it does not have a garage. The foreclosure is the most recent sale but in another section of the community. The buyers

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Jeffrey Schn…, Agent, Austin, TX
Fri May 23, 2008

Looks like your question got cutoff at the end. As I suspected, since your home is valued somewhere North of $350,000, a $15K difference to your asking price is still within the margin of error (5%). Meaning, it's all too easy at this price level for a $15K difference to be very hard to pin down. Another appraiser could easily be $15K higher and the lending community might ask a few questions as to why the differences, but they could actually accept either appraisal as reasonable. Note, it’s also easy for another appraiser to be $15K less!

However, please understand that we're all still presuming the buyer is getting financing, especially since you said they want help with $11K in closing costs.

But here's the real rub, if what you're saying is the buyer offered you $360K, and they have an appraisal showing a value of $360K, but also wants $11K in closing costs, then they are really offering you $349K for a house that their own appraisal shows is worth $360K. The appraiser is required by USPAP to show value net of any seller paid closing costs, so the appraiser has already accounted for similar sales in your area and netted out the closing costs.

Contrary to prior answers, if the foreclosure in the area was a "distressed" sale, and "distressed" foreclosures are not common in your neighborhood (usually within a mile or less depending on the type of property), then the appraiser needs to defend why he is using it. Appraisals are supposed to be done for "like" properties.

If you're talking about potentially having to cough up $9,000, go spend $350 on your own appraisal. And once done, ask the appraiser to help educate you on his conclusions. It might not hurt to provide your appraiser with the same kind of "help" the buyer's appraiser may have gotten from the buyer's agent or the buyer. Some will comment that the appraiser for the buyer shouldn't have gotten any information from the buying side, but that would be a perfect world.

Real question is: you have a buyer interested enough to have made an offer on your home and you're only $15,000 different between offer and estimated value. If you can't afford to take money out of your pocket, but you can afford to put the house back on the market and wait for another buyer, then do it. Otherwise, consider either negotiating with the buyer to cough up some more of the closing costs, or increase their down payment to make the ratios work.

Good luck,

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Patti Shawgo…, , Baltimore, MD
Fri May 23, 2008
The buyer's lender is really the one that orders and owns the appraisal, and you may want to see if you can speak with him/her since there is no agent involved for you.

As long as the buyer is not getting an FHA or VA loan, there should be no issue with getting a second appraisal completed. If it is FHA/VA once the appraisal is registered for a property you can't have a new one for 6 months. You can get the appraiser to adjust things on that appraisal, just no new appraiser.

However, PG county is considered a declining market by lenders/appraisers and be prepared for some scrutiny of a new higher appraisal if the comps are being forced a little bit to make it work.

As a side note....are they first time home buyers? have they looked at programs to help with closing costs that you wouldn't have to give a concession for? if they are, check out: http://www.morehouse4less.com that is a state program and can give 2% or 3% grants. That program is called CDA, but there are a bunch of other programs as well, if they are 1st time buyers and fit within the income guidelines.

Good Luck!
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Marilee Herr…, , Hamden, CT
Fri May 23, 2008
In my opinion, the appraiser should not have used a foreclosure, it is not a true comp.
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