Appraisal Problems During COVID-19 Crisis

Anonymous · ‎03-18-2020

Scheduled to close at the end of this month, the appraisal came back at sales price. But appraiser made a ton of obvious mistakes with calculations and comps and local home values do not support the price...assessed value is about 200k under asking. Lender was not initially questioning the appraisal after I told them about the botched appraisal, but has decided to now order a review appraisal. If the the review comes back with a more accurate (lower) value, why is that such a deal killer? Can't we just use that accurate valuation as leverage to negotiate down with the seller and proceed? At this point they have a bird in hand...it seems foolish to not come to an agreement especially in the times that we are in currently.

Anonymous · ‎03-18-2020

This would be a case of utilizing your appraisal contingency, if your purchase contract had one.

Without it, you're still welcome to negotiate pricing with the seller, but leverage isn't on your side.

Revelate · ‎03-18-2020

@Anonymous wrote:
This would be a case of utilizing your appraisal contingency, if your purchase contract had one.

Without it, you're still welcome to negotiate pricing with the seller, but leverage isn't on your side.

Pretty much this.

You might get lucky in the sense that appraisals are 3rd party now so in theory if they are accurate it could be a challenge for them to sell the home at asking price, but they don't have to move on their number and then you are stuck with said contingency if you have one.

Otherwise you are funding the difference out of your pocket, which usually is awkward.

Curiousity question, how did your offer get so much above what you clearly think should be lower?

I am worried on my own appraisal as there won't be many comps (new construction in a soon to be rapidly developing area if we didn't have this COVID-19 issue) and not sure what I will do if it does comes to that. Probably will just fork over the check but meh.

JVille · ‎03-19-2020

Basically the seller can walk or you can walk. If you are in a hot market the seller can move on to another buyer. Or you and the seller can renegotiate. Sometimes these things work out but you may be out the cost of 2 appraisals and any inspections you have ordered and nothing to show for it.

what does your Real Estate Agent say?

Anonymous · ‎03-19-2020

@Revelate If your property is among the first homes to be built in the community, those properties tend to benefit the most pricewise. And if there are no feasible comp picks, the appraisers just extend the distance or the sell date as a backup. But this COVID-19 chaos could slow the increase of your equity by causing development delays. I am sure it will work out well for you.

As for my dilemma, my agent recommended the offer to price out other buyers. And overall it is a pretty nice home compared to others that I saw, I am probably just going through a smidge of buyer's remorse....and I will be overpaying if the 2nd appraisal magically supports the first. Thank you for your feedback.

Anonymous · ‎03-19-2020

@JVille wrote:
Basically the seller can walk or you can walk. If you are in a hot market the seller can move on to another buyer. Or you and the seller can renegotiate. Sometimes these things work out but you may be out the cost of 2 appraisals and any inspections you have ordered and nothing to show for it.
what does your Real Estate Agent say?

Thanks for your reply. The agent keeps saying that the appraisal is difficult to challenge because it is a subjective opinion of value and he is going to see if we can renegotiate if it comes back lower.