House #21: Appraisal Came in Low

June 29, 2011 · 3 comments

It doesn’t happen very often (especially these days), but the appraisal on The Leak House came in lower than the sale price…

I can’t say I’m too surprised. We were under contract at full-price ($110,000), and I knew from the time we listed it for sale that the appraisal was unlikely to come in that high, even if we got it under contract for that much. In fact, the appraisal came in exactly where I expected it to — at $105,000 — which was the sale price of The Trifecta House located right around the corner.

This means that the lender will only lend up to $105,000, which in turn means that we needed to drop the sale price to that amount to get this deal done (or the buyers could contribute more of their own cash, which they’re not in a position to do). In return for lowering the price by $5000, the buyers agreed to reduce the amount of closing costs we are contributing to the deal by $2000, so ultimately, the net loss to us is only about $3000.

I think this is a fair outcome, and everything should now be on track for a closing next week. I’ll post all the final numbers after the closing…

3 responses to “House #21: Appraisal Came in Low”

  1. Matt Kearney says:

    Hi J,

    We just got killed on an appraisal too.

    We have a buyer at $130,000 and the appraisal came in at $111,000. The bonehead appraiser used two short sale comps at $99k and $110k when there were 2 rehabbed comps right around the corner at $124k and $128k.

    We put in for a review with the lender and presented all this info but they denied it. It is FHA so this is gonna stick with the property now.

    Our current buyer really wants the home, and she is willing to pay $130k and is also fighting with the lender over the appraisal.

    This is the first time this has happened to us also…… we’ll see what happens.

  2. J Scott says:

    Matt –

    That really sucks. Not to take away from the good appraisers out there (I’ve met many good ones), but some are just so egotistical that they can’t admit when they’ve made a mistake or when they’ve missed good data. Couple that with the fact that banks are probably beating up on them, and there’s a recipe for investors getting screwed with absolutely no recourse…

    I’m sure you’ve already thought about (or done) this, but have you talked to the appraiser directly? Generally doesn’t help much, but sometimes if you can get the guy on the phone and plead your case, he’ll realize that his screw-up is actually affecting another human being and change his mind on revising the comps. Again, I’m sure you’ve already thought about all your options…and I certainly feel your pain. Good luck with this one, and let me know if you figure something out…

  3. lamac66 says:

    I feel there is some scam going on in some of these appraisals. Supposedly the lender is not supposed to have direct contact with appraisers other than selecting them from a management list.

    My wife and I were set to close on at house listed at 115k. We did the comps in the area and did a market analysis and they all came up more than 120k. Our perspective house “appraised” right at 115k. Suspicious and disappointing none the less.

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