Are houses appraising low right now?

[applejack]

Hello! We are in escrow for a house right now and the appraisal came in very low. My agent is telling me that is just the nature of the market right now, but I am not so sure. The appraisal came in over 50,000 low. Are others experiencing this right now, or is my situation an anomaly?

[Coronita]

It depends on a lot of things. If you happen to be buying in an area which doesn’t have much turnover in sales, it might be hard for an appraiser to find a real comparable. So that might give a much lower appraised value. Some people also end up working with an appraiser out of the area. And that appraiser might be clueless. That happened with one of my refinances. It depends. So many variables.

[Doofrat]

We just had an appraisal done on a house that we bought for quite a bit higher than the comps would support. There wasn’t a lot of activity in the area, most of the comps were a few years old and were forclosures, and it appraised for what we payed for it.
One of the factors that I think helped with the appraisal was that there were multiple offers all near the price we paid and that fact was in the appraisal report.

[CA renter]

If the appraisal came in low, use it to your advantage. Tell the seller than you can only pay the appraised amount. See if they reduce it all the way, or part of the way.

Good luck!

[Coronita]

[quote=CA renter]If the appraisal came in low, use it to your advantage. Tell the seller than you can only pay the appraised amount. See if they reduce it all the way, or part of the way.

Good luck![/quote]

In this market? ha ha ha ha. If I were the seller, I’d say… See ya, next buyer.

[fun4vnay2]

The housing market is quite hot right now, so asking for reduction base don reduced appraisal won’t fly.
Or wait if you can for the market to cool down..

[FlyerInHi]

I find it very interesting that people insist on appraisal coming in at or above what they want to buy/finance at. Some people actually get angry/upset when they don’t want the appraisal they want.

So much for independent appraisals.

[SD Realtor]

50k low seems a bit out of the norm. Have you presented the appraisal to the listing agent and have them see if they can find comps that the appraiser may have missed. Similarly there may have been improvements to the home such as rooms added or square footage that are not on the tax roll meaning they were done without permits. Thus the seller may believe the home should be valuated as a larger home but the appraiser didn’t give the full ppsf on the improvements because they were made without permits.

Or the sellers just priced the home way above market rates and are convinced someone will come along and pay more then appraised value.

I would advise you to attempt to get a little price relief, perhaps split the difference with the seller. Alternately you can offer to get a second appraisal and split the cost of that with the seller. There are several options.

[CA renter]

[quote=flu][quote=CA renter]If the appraisal came in low, use it to your advantage. Tell the seller than you can only pay the appraised amount. See if they reduce it all the way, or part of the way.

Good luck![/quote]

In this market? ha ha ha ha. If I were the seller, I’d say… See ya, next buyer.[/quote]

Sure, if there are cash buyers or buyers with extra cash over the 20% who are willing to pay an inflated price. I’d still take my chances as a buyer to negotiate. IIRC, if they show the appraisal to the listing agent/seller, it’s supposed to be included as part of the disclosure package. SDR, please correct me if I’m wrong on this.

[Coronita]

[quote=CA renter][quote=flu][quote=CA renter]If the appraisal came in low, use it to your advantage. Tell the seller than you can only pay the appraised amount. See if they reduce it all the way, or part of the way.

Good luck![/quote]

In this market? ha ha ha ha. If I were the seller, I’d say… See ya, next buyer.[/quote]

Sure, if there are cash buyers or buyers with extra cash over the 20% who are willing to pay an inflated price. I’d still take my chances as a buyer to negotiate. IIRC, if they show the appraisal to the listing agent/seller, it’s supposed to be included as part of the disclosure package. SDR, please correct me if I’m wrong on this.[/quote]

With the way lending requirements are these days, provided the person can qualify for the loan, I’d take the one(s) that gave me the higher offer, who had more than 20% down, but I wouldn’t require them to pay 100% cash, especially if the house is over $1million. I think it would depend on how much activity there is in that area. If there has been many sales nearby of comparable, then the that might be a red flag. But if the sales history in that area has been spotty, and especially if the appraiser isn’t from san diego, that might have a lot to do with it. I don’t follow what you said about “the 20% who are willing to pay an inflated price”. I’m not sure where you got 20% from. And as far as inflated price. One can determine if the price is inflated if there is a reasonable comparable.

[spdrun]

Appraisals should be conservative. Banks shouldn’t lend based on inflated offers, but rather on value history over the past 12-24 months. If prices can increase quickly, they can also go down, and the bank needs to protect itself and its investors. If people can’t get a loan, too fucking bad for them. Not everyone needs to own a home.

[Essbee]

Three years ago (March 2012), we were in escrow, and our (now) home in 4S was appraised low. Not only that, the appraiser indicated that it was a “declining market.” Because of this, we had to put 25% down (rather than the 20% we had planned.)

Three years later, it is worth about $300K MORE than the price we paid.

I guess I’m glad now that we put down 25%, but it left us without much savings for a little while…

I don’t think there is much science behind this business.

[CA renter]

[quote=flu][quote=CA renter][quote=flu][quote=CA renter]If the appraisal came in low, use it to your advantage. Tell the seller than you can only pay the appraised amount. See if they reduce it all the way, or part of the way.

Good luck![/quote]

In this market? ha ha ha ha. If I were the seller, I’d say… See ya, next buyer.[/quote]

Sure, if there are cash buyers or buyers with extra cash over the 20% who are willing to pay an inflated price. I’d still take my chances as a buyer to negotiate. IIRC, if they show the appraisal to the listing agent/seller, it’s supposed to be included as part of the disclosure package. SDR, please correct me if I’m wrong on this.[/quote]

With the way lending requirements are these days, provided the person can qualify for the loan, I’d take the one(s) that gave me the higher offer, who had more than 20% down, but I wouldn’t require them to pay 100% cash, especially if the house is over $1million. I think it would depend on how much activity there is in that area. If there has been many sales nearby of comparable, then the that might be a red flag. But if the sales history in that area has been spotty, and especially if the appraiser isn’t from san diego, that might have a lot to do with it. I don’t follow what you said about “the 20% who are willing to pay an inflated price”. I’m not sure where you got 20% from. And as far as inflated price. One can determine if the price is inflated if there is a reasonable comparable.[/quote]

Whoops! Sorry about the totally horrible syntax there, as I was posting in a hurry.

What I meant was that the seller could sell to all-cash buyers if the house is in an area that attracts these types of buyers, or simply to someone who is willing to fork over additional money that exceeds the 20% down payment, like Essbee did. A mortgage company won’t usually increase the amount they’re willing to lend beyond 80% of the appraised value if it’s a conforming loan, so the buyer has to increase the amount of cash they’re willing to contribute above the 20% down payment.

In our case, the appraisal came in low; and even though we were all-cash buyers, we still insisted on purchasing at the lower, appraised price. We offered to pay for the seller to hire their own appraiser to see if they could get a different number, but they weren’t able to find any comps that would justify their higher list price. In the end, we paid the appraised price plus $10K toward our agent’s commission. We also let them forgo a lot of the repairs that they would have had to do for buyers who were using a mortgage (required termite work for mortgaged properties) which saved them thousands of dollars. The appraisal came in $50K below the list price.

The appraisal also noted that the market was declining, so even though they wanted to test the market some more, they knew that they had a solid buyer who could close in a matter of days, so we got the house.

[CA renter]

[quote=Essbee]Three years ago (March 2012), we were in escrow, and our (now) home in 4S was appraised low. Not only that, the appraiser indicated that it was a “declining market.” Because of this, we had to put 25% down (rather than the 20% we had planned.)

Three years later, it is worth about $300K MORE than the price we paid.

I guess I’m glad now that we put down 25%, but it left us without much savings for a little while…

I don’t think there is much science behind this business.[/quote]

Congratulations on the price increase! 🙂

Agree with your last sentence. As a result of the bubble, appraisers had requested changes to the system that would have enabled them to appraise a property without any pressure from the sellers or RE agents. It seemed to be working for a while, but it looks like things have reverted to the appraisers hitting the numbers for the RE agents/sellers.

[SD Realtor]

Agreed 100% with you FLU. Cash buyers are not needed just because the home doesn’t appraise.

Every case is unique and to make blanket statements without understanding or seeing the actual home and comparing it comps in the area is ridiculous.

[Author]

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