Chess Player, Home Buyer in San Francisco, CA

I recently made a $1.6M offer on a Fremont home. The lender's appraiser came in with an appraised value that

Asked by Chess Player, San Francisco, CA Tue May 6, 2008

was about $200K (!) less than the purchase price. While I am in the process of getting out of contract due to appraisal contingecy, the seller's agent brought his own licensed appraiser who is appraising it to the contract price. Comments/observations about this situation? Any likely 'funny business'?

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3 votes Thank Flag Link Wed May 7, 2008
From what you have written, it sounds like there may be some coersion by the seller's agent to influence the second appraisal to a predetermined value and have the appraiser commit appraisal fraud. If that is the case there are definately violations being committed beyond funny business by both the agent and appraiser.
1 vote Thank Flag Link Mon May 12, 2008
Just curious .. Is this Dr. Cheng speaking? Haven't seen you on Trulia for a while.

Need help looking for house in Fremont? I can help - My brother lives there and I can find you a great Reator there To help you, of course :-)

By the way, I am replying to you in this way risking all kinds of TDs as you must know, but could not resist if you are the Dr. Cheng I think. ;-)

1 vote Thank Flag Link Tue May 6, 2008
Sylvia Barry,…, Real Estate Pro in Marin, CA

The lender might only accept the appraisal from their own appraiser in order to approve your loan. Since the mortgage crisis, lenders have the tendency to tighten on the guidelines for loan borrower. Also they will deduct 5% less than the loan you asking due the decline in market value. So if you are looking at the full amount of the loan that you are expecting to have. ( for example if you put 20% down for 1.6M that leaves u
around 1,280,000 you will only get around 1,216,000 ( which is 5% less than the loan value) Lender might not take the appraisal provided by listing agent in consideration since they consider it as very biased. I hope my answer will help. You can contact me for more details. Are you working with a Realtor? Your agent might have good answer for you if you ask. Good luck on your biggest investment.
1 vote Thank Flag Link Tue May 6, 2008
There are a couple things to consider here, one would be the appraisers familiarity with the Fremont market. Also, if it is an executive home are any outstanding features that the appraised did not consider? Obviously you and your agent must have done some homework on the value of this home as well before writing. Appraisers have a very difficult task these days, you will find that they are trying to appraise the property in an almost impossible market; however, it is imperative to have an appraiser who knows the market they are appraising. If you and your agent disagree with this appraiser and do get released from the contract then you have several choices:
• Re-negotiate
• Decide your attachment to this home
• Start looking…there is plenty out there!

Delia Fairwell
0 votes Thank Flag Link Tue Jun 24, 2008
Hello Chess player,

Congratulations! I am happy that it all worked out for you.

Yeah, there is no price tag if you love something!

Please call me know if you need me to help any one that you know who wants
to buy or sell. I’ll happy to help them find their dream home.
My cell phone 510-381-2105

Best wishes in your new home!

Charo Bhatt
Web Reference:
0 votes Thank Flag Link Mon Jun 9, 2008
Thanks for all your input. We initially pulled out of contract and got the deposit back. Then we "met somewhere in the middle", as the seller dropped the price and we agreed to pay a "premium" above the lender-appraised value as we really liked the house. New contract, all in order, waiting to close and move in. Should be a fair transaction, as both the buyer and the seller are equally happy/unhappy.
0 votes Thank Flag Link Mon Jun 9, 2008
An Apraisal is an opinion of value. Two appraisals often will differ as much as 10%. Sometimes appraisers do not value the amenities of the property as high as they could. For instance a home may have views, pool, guest house, private location and spectacular landscaping. A simlar home on the street may be significantly inferior and just plain ugly to the tune of $200,000 when you are in the $1.6M
price range.

As an appraiser as well as Realtor, I would want to get a totally unbaised opinion of value. The lender's appraiser is working for the lender and is probably conservative. The listing agent 's appaiser is working for the seller and probably liberal in price. Pick an appraiser of your own and ask for fair market value. If you really like the home and want it, see if your agent can help re-negotiate the price with the seller if your appraiser comes in lower than the sales price. This works particularly well if the loan cannot be made at the lower appraised value. Then it is you and the seller having a problem with the lender that you can resolve together.
0 votes Thank Flag Link Mon Jun 9, 2008
Hello Chess Player,

Well, you have described a situation to get a possible solution.

Now, before a justified answer can be given..

I have some questions for you.

1. Did your agent give you a comparable analysis?
2. How many properties have you seen in the market before you wrote this offer?
3. For how long have you been looking for a home?
4. Is this your first offer you made on a property?
5. What was the asking price of the home?
6. How many sqft this home is with kind of the lot size?
7. Is this home in Mission School District?
8. Your agent gave you market updates?
9. Are you doing any creative financing in this transaction?

Not to put down any fellow agents, but $200,000 is a big difference. The offer should have been negotiated up front carefully. I think funny business happened up front.

Generally, if buyers have adequate down payment, appraisal should not be a problem. In the market place today, loan amount of over 1 mil., many lender are asking for 2 appraisals to protect their monies.

You are an innocent consumer, you should not suffer.

Feel free to contact me with the answers to my 9 questions and I will certainly help you right. I have 17 years of Finance and Real Estate experience.

Best luck on your endeavor,

Charo Bhatt
Cell 510-381-2105
Web Reference:
0 votes Thank Flag Link Mon May 26, 2008
Chess Player,

It's not about distance as much as the density of the area. For example, if one were to appraise a farm or ranch they would have to look for comps miles and miles away. Whereas in the city proper of San Francisco, you can get enough comps just blocks away. Fremont is still spread out, and it's possible to go 1-2 miles. BUT! In which direction? The reason why I ask is because the value of properties can be influenced depending on which "side of the tracks" the property is.

I ran into this problem about a year ago when I was trying to buy a four-plex in Tallahasse FL where I used to live. The lender I was using at the time selected an appraiser who was rather sloppy in his work (wrong address, wrong picture, wrong side of town). And I didn't accept his appraisal. I went with another lender who used an appraiser who, in my opinion, did a better job and picked the right comps from the right quadrant of the city. Location is critically important!

It helps if your realtor is familiar with the area, because she/he can also offer opinions ---- to support or challenge the appraisal. Don't be afraid to conttest an appraisal.

Good luck!
0 votes Thank Flag Link Wed May 14, 2008
Is it common (or uncommon, or just plain wrong) for an appraiser to consider comps that are 2 and 3 miles away to justify a (high) contract price, especially in a relatively 'active' area like Fremont? Would lenders and banks accept such an appraisal (done, perhaps, solely to "hit the target")?

By the way, thanks for all the insightful responses.
0 votes Thank Flag Link Wed May 14, 2008
Cheng...Where you Dr.Cheng before?

Chess you did the right thing by canceling.
If you have the appraisal report, you than have the appraiser info, send him/her a letter, or better yet send him a link to your post so he can explain him/her self.
0 votes Thank Flag Link Mon May 12, 2008
Mr.P, Other/Just Looking in Arizona
Since you are not buying the house, would you share the address of the house? So that maybe I can take a look at?
0 votes Thank Flag Link Sun May 11, 2008
Thank you Pacita (and others). In closely reviewing the appraisal report prepared by the seller's agent's 'licensed' appraiser, I noticed that some of his comps were over 2 miles (!) away, and he has not made several adjustments, including those to reflect the age of the property, etc., to 'bridge' the $200K gap. He has also conveniently ignored closer and more relevant comps. Should I report this guy (and if so, to what agency?), as I feel like this somewhat of an attempt to defraud me, the buyer, and the bank (lender)?

By the way, I pulled out of the contract and got the deposit back, so that is not an issue.

- Chess Player
0 votes Thank Flag Link Sun May 11, 2008
It's your loan, your lender, your appraiser. Obviously, your lender would prefer to use their own appraisal report. Your lender may look askance at a seller's agent's appraiser's report and regard that second appraisal as suspect.

Trust your gut.

Your options are:
1. negotiate with the seller to lower the sales price to the appraised value
2. Or for a lower price --- and then you cover the difference (but would you want to)
3. As long as you haven't cleared your contingencies, you can back out if that's what you want to do, and get your deposit back. Although you already spent money on your appraisal, and presumably, your other inspections, it may be worth it than end up overpaying for a property.

Good luck.
0 votes Thank Flag Link Sun May 11, 2008
Hi Chess Player:

Sorry. I guess I started it, my apology.

Not knowing about the house, it's difficult to make comment on the specific appraised value for the house.

However, appraisers can come in at various numbers. One of the problems I have with lender assigned appraisers is that they often come from a completely different area. Although if an appraiser is used to covering many areas and they are experienced in those areas, I am fine with that.

I am also kind of O.K. if they hardly cover an area but they at least try to call, discuss various prooperties on the market and sold, try to understand before they appraise the property. The ones I really have problems with are the ones has never been to a place and went ahead and appraise the property. As we know, real estate is local and each property is quite different from others. There could be discrepencies. .

Even lenders have been ordering two appraisals to double check now a days; especially the ones that are of higher value such as over $1M. .

0 votes Thank Flag Link Wed May 7, 2008
Sylvia Barry,…, Real Estate Pro in Marin, CA
To answer your question or try to provide some insight. When buying a Home with a loan amount above 1 million there are usually certain certified appraisers that are able to appraise these properties and if you are putting down a substantial amount and you will have a loan lower than 1 million then you might have a normal appraiser. The difference is experience and many other things, you have to have different certifications to appraise over a million dollars for a lender.

Why i mention that is that in today's market even in the old market usually when borrowing over a million dollars on a house lenders will ask for 2 appraisals and still do there own AVM. They do so now more than they did in the past. Be careful about removing the contingencies for appraisal if this is your case, i have seen many lenders cut the value even more if there AVM comes in with different figures. This is a big problem because just because you got 2 appraisals doesn't mean the bank will accept them. If you are paying cash then its your call and getting an appraisal from a certified appraiser with the ability to appraise over a million dollar loan amount is better in my eyes than one that is capped at 999K.

Also when a bank cuts the value on your appraisal if they do, they will lend on the LTV based upon there value so if your getting a 70% LTV on 1.6 million and the bank says its worth 1.5. The bank will change the loan amount they are willing to lend accordingly.

I have seen buyers cover the difference the bank did not want to lend in some cases, but that is entirely your call and i would strongly suggest talking to your lender and Realtor.

Good Luck

And if you have any further questions feel free to contact me
0 votes Thank Flag Link Wed May 7, 2008
This house also shown in Trulia, look at this nice street view photos, and pan around to get all angles ...…
0 votes Thank Flag Link Wed May 7, 2008
I told my sister that you, the top #2 Trulia Realtor has brother living in Fremont, so that can't be wrong... buying at Fremont ... and she just got this wonderful house ...…

I have been busy flying back and forth trying to buy a condo can walk to Berkeley campus so not able to get online much.

She used the same realtor of my other sister who is living at Mission View Estate so that housing search can be effective. e.g. the realtor can respond the requirement like "...ok, I need a house just like my sister, closeby, with great view, ...etc". Then we saw 5 houses that weekend, and my mom and my sister fell in love with this wonderful house, and made an offer late 11pm at my other sister's home.

I would have to say the realtor was driven crazy as she also got many other buyer clients to serve and ran back and forth. Her Mercedez Benz is comfortable as my mom used to the car.

I told my sister this story of $200,000, and she said it would be great either way, but at the time her house close, that's NEW MARKET PRICE set up, and her house would be the latest comparable to all appraisers in town. No matter what, she has to buy this house because my mom loves it.

In Chinese society, one would buy a nice house for the mom, not trying to cut hear and there, besides Mother's Day is coming, and my mom is getting old. My sister said, she would try her best to please my mom and to make her wish come true, and she missed my other sister at Mission View Estate a lot and her kids, so buying a house she likes to live closeby is her dream. Besides, my other sister fly to Los Angeles every month to visit my mom for so many years, and it would be much better to live closeby.

So, if you are Chinese, my sister's advise is "DON'T send your mom to senior housing", instead, buying a nice home that she likes for her and hire a housekeeper to take care the house for her that close to you.
0 votes Thank Flag Link Wed May 7, 2008
My sister just called me that she got this wonderful house at Fremont… She is so excited!!!

She has to buy this house because this is the only house in Fremont my mother like, and she said my mom is getting old and sometimes money can NOT buy lots of things especially the happiness of my mom, and I agree.

Besides, she just got her EMBA from Tsing Huan University, and all of her classmates are either CEO or owners or developers in China and very interested in coming to invest in the US, so she needs to have a nice house at the best town near Silicon Valley to start her VC business.

How far is this house from my sister's? I mean if you do not want this house, could you refer it to me? so that maybe I can get this one. I have not seen any houses at Fremont under $1.6m, but the houses I like in the open house when we were there were all gone!!!

I would just use P/T (price/tax) ratio to figure our the price of this house you made offer, with respect to my sister's. If I can save $200k, that is fine, otherwise, I am sure I can live with your offer since you sounds like a savvy buyer. I love to follow savvy buyers.
0 votes Thank Flag Link Tue May 6, 2008
200K is a large discrepancy (but maybe the sellers are still living in past times).

Examine the homes used inthe appraisal - look closely at the location and which school district. Also map them and check if they are in the same neighborhood. Are the homes of the same integrior square footage and the same number of beds & baths?
0 votes Thank Flag Link Tue May 6, 2008
Well, you have four choices:
1. Back out of the deal.
2. Negotiate with the seller for the $200K.
3. Negotiate to split it to $100K from both sides.
4. Get another opinion from another appraiser and then decide.

Sometimes there are appraisers that are not from the area and do not know the property values. For example in Hayward property values are down from last year by about 30 % whereas Fremont has gone down 6% according to the stats received yesterday. So even though Hayward and Fremont are very close in distance, the property value difference is huge. So if this appraiser is not familiar with the area, he will not understand Fremont values as much.

Also an appraisal is one persons view or opinion of the value in the area. I hope you received the comparables when you put in the offer with your agent, so you should be able to see if the price you had offered at that time was a fair price.

When the loan amount is over a million dollars, most banks want to see at least two appraisals. The lenders want to use their own appraisers and they could have a tough time justifying the price in today’s market.

Will you still be able to qualify for the loan with the $200K difference in appraisal value? The bottom line is do you still want to buy the house? That is the question you need to ask yourself, since as you know, you can back out based on the first appraisal.

If I can be of further help, please let me know.


Meena Gujral
Help-U-Sell Achievers Realty
40083 Mission Blvd
Fremont, Ca 94539
0 votes Thank Flag Link Tue May 6, 2008
Hi Chess Player,

Check Mate! The appraisal is a part and parcel of your loan application. The listing agent cannot just barge in and tell you that her "appraiser" has the value. It is your lender who decides which appraiser to use. And if you are using a mortgage broker, the ultimate lender will definitely order a review. However, do you want to go that far? Why don't you ask your agent to have the seller reduce the price by 200k. At this juncture, it will not behoove you to pay the amount that you "thought" the property is worth. Hang tough and make a DEAL!

Good Luck to you,
0 votes Thank Flag Link Tue May 6, 2008
The key thing to remember about any appraisal is that it is a "snapshot" of the value of that specific home in that specific market at that specific time. The second thing to remember is that regardless of the appraiser, there is an undefined degree of subjectivity involved in any report.

Obviously you thought the property was worth $1.6 so hang in there and see what the new appraiser says. The check and balance in these situations is the Lender. Most Lenders run an A.V.M. which is an automated value calculation of the home while it is still in underwriting. Sure the underwriter looks at the appraisal, but they compare it against what they can find for themselves.

Take a deep breath and order us both a skinny mocha latte.

Good Luck!
0 votes Thank Flag Link Tue May 6, 2008
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