cancel
Showing results for 
Search instead for 
Did you mean: 

Appraisals, why are they not done before contracts are made?

tag
Anonymous
Not applicable

Appraisals, why are they not done before contracts are made?

 Please forgive my rant about waiting for the results of my appraisal for my USDA Direct 

contract I currently am under for a home.  

 

I just thought of a question, I realized I had addressed this last year when I sold a home.

I recall asking my listing agent what my home would appraise for to make sure I was pricing 

it correctly.  In my case, the home was one I inherited and could never afford.  It was in pre-foreclosure

and I didn't stand to make a profit, I just wanted to satisfy the debt.

 

So now I am driving myself crazy waiting to hear the results of the appraisal for the home I wish to 

purchase.  The listing agent does not know what the house will appraise for, and I found out in the

course of it all that the house is overpriced.  So there is a very good chance it will not meet appraisal.

 

Why on earth if you are selling a house that is in an average first time homebuyer's price bracket 

would you not find out what your home appraises for before you price it?  After all, no bank will 

finance above appraisal.  I understand if the house if priced low for an obvious flip or rental, to lure

a cash buyer or investor.  But why market and contract and wait if the appraisal will not be met?

 

I know I have seen ads where house was stated to be listed under appraised value.  That is a sure

fire way to attract a reputable buyer, especially one who was already preapproved and was ready to 

sign a contract, like myself.  

 

Any thoughts?  

Message 1 of 26
25 REPLIES 25
coterotie
Established Contributor

Re: Appraisals, why are they not done before contracts are made?

This is going to sound a little harsh, but why didn't you pull the comps before you made the offer?  How did you know how much to offer unless you pulled the comps and did your research on the seller to know how much they had in the house?  If you didn't want to do the research yourself, you could easily have had your realtor do the work and then done the preliminary appraisal yourself.  If the listing agent doesn't have a pretty good idea (within 5K) of what the house should appraise for then they are a poor excuse for a 7% Limo driver.

But regardless, one would hope you had an appraisal contingency in the contract so you are protected should the appraisal come up short.  Why would you buy a house that is overpriced unless you didn't care what it appraised for and had the money to effectively pay cash?

 


@Anonymous wrote:

 Please forgive my rant about waiting for the results of my appraisal for my USDA Direct 

contract I currently am under for a home.  

 

I just thought of a question, I realized I had addressed this last year when I sold a home.

I recall asking my listing agent what my home would appraise for to make sure I was pricing 

it correctly.  In my case, the home was one I inherited and could never afford.  It was in pre-foreclosure

and I didn't stand to make a profit, I just wanted to satisfy the debt.

 

So now I am driving myself crazy waiting to hear the results of the appraisal for the home I wish to 

purchase.  The listing agent does not know what the house will appraise for, and I found out in the

course of it all that the house is overpriced.  So there is a very good chance it will not meet appraisal.

 

Why on earth if you are selling a house that is in an average first time homebuyer's price bracket 

would you not find out what your home appraises for before you price it?  After all, no bank will 

finance above appraisal.  I understand if the house if priced low for an obvious flip or rental, to lure

a cash buyer or investor.  But why market and contract and wait if the appraisal will not be met?

 

I know I have seen ads where house was stated to be listed under appraised value.  That is a sure

fire way to attract a reputable buyer, especially one who was already preapproved and was ready to 

sign a contract, like myself.  

 

Any thoughts?  


 

Message 2 of 26
Gunnar419
Valued Contributor

Re: Appraisals, why are they not done before contracts are made?


@Anonymous wrote:

 Please forgive my rant about waiting for the results of my appraisal for my USDA Direct 

contract I currently am under for a home.  

 

I just thought of a question, I realized I had addressed this last year when I sold a home.

I recall asking my listing agent what my home would appraise for to make sure I was pricing 

it correctly.  In my case, the home was one I inherited and could never afford.  It was in pre-foreclosure

and I didn't stand to make a profit, I just wanted to satisfy the debt.

 

So now I am driving myself crazy waiting to hear the results of the appraisal for the home I wish to 

purchase.  The listing agent does not know what the house will appraise for, and I found out in the

course of it all that the house is overpriced.  So there is a very good chance it will not meet appraisal.

 

Why on earth if you are selling a house that is in an average first time homebuyer's price bracket 

would you not find out what your home appraises for before you price it?  After all, no bank will 

finance above appraisal.  I understand if the house if priced low for an obvious flip or rental, to lure

a cash buyer or investor.  But why market and contract and wait if the appraisal will not be met?

 

I know I have seen ads where house was stated to be listed under appraised value.  That is a sure

fire way to attract a reputable buyer, especially one who was already preapproved and was ready to 

sign a contract, like myself.  

 

Any thoughts?  


Because you'd end up paying a big amount of money to get an appraisal that a lender wouldn't accept. Besides that, you as as seller wouldn't benefit in any way. Sometimes sellers can price high for the market and actually get it because either the house will appraise higher than expected or buyers will be willing to come up with more money down.

 

I once listed a house about $10k higher than most in the neighborhood were going for (this was in a neighborhood of $50-$70k homes). My house was nicely fixed up but the neighborhood was crap. So the actual value was a crapshoot. Is the house "worth" what's typical in the neighborhood or is it worth more? As it happened, it appraised high and sold high, but before that happened two real estate brokers told me I'd never, ever get anywhere near what I was asking because it wouldn't appraise.

 

Yes it's frustrating for buyers, but there's simply no such thing as a one and only accurate appraisal that will make everybody happy.

Message 3 of 26
sweetschuni
New Contributor

Re: Appraisals, why are they not done before contracts are made?


@Anonymous wrote:

 Please forgive my rant about waiting for the results of my appraisal for my USDA Direct 

contract I currently am under for a home.  

 

I just thought of a question, I realized I had addressed this last year when I sold a home.

I recall asking my listing agent what my home would appraise for to make sure I was pricing 

it correctly.  In my case, the home was one I inherited and could never afford.  It was in pre-foreclosure

and I didn't stand to make a profit, I just wanted to satisfy the debt.

 

So now I am driving myself crazy waiting to hear the results of the appraisal for the home I wish to 

purchase.  The listing agent does not know what the house will appraise for, and I found out in the

course of it all that the house is overpriced.  So there is a very good chance it will not meet appraisal.

 

Why on earth if you are selling a house that is in an average first time homebuyer's price bracket 

would you not find out what your home appraises for before you price it?  After all, no bank will 

finance above appraisal.  I understand if the house if priced low for an obvious flip or rental, to lure

a cash buyer or investor.  But why market and contract and wait if the appraisal will not be met?

 

I know I have seen ads where house was stated to be listed under appraised value.  That is a sure

fire way to attract a reputable buyer, especially one who was already preapproved and was ready to 

sign a contract, like myself.  

 

Any thoughts?  



Appraisals can be costly and so I'm certain that some (not all) sellers would prefer to not incur that expense considering that they are on the selling side of things. Personally, I think that I would always have some interest in how much my home is worth though and would check into it or have it appraised from time to time just to know for certain but I am a bit OCD at times though LOL Smiley Happy

Licensed REALTOR in the state of Georgia - "Far and away the best prize that life has to offer is the chance to work hard at work worth doing" Theodore Roosevelt


Message 4 of 26
Gunnar419
Valued Contributor

Re: Appraisals, why are they not done before contracts are made?


@sweetschuni wrote:

@Anonymous wrote:

 Please forgive my rant about waiting for the results of my appraisal for my USDA Direct 

contract I currently am under for a home.  

 

I just thought of a question, I realized I had addressed this last year when I sold a home.

I recall asking my listing agent what my home would appraise for to make sure I was pricing 

it correctly.  In my case, the home was one I inherited and could never afford.  It was in pre-foreclosure

and I didn't stand to make a profit, I just wanted to satisfy the debt.

 

So now I am driving myself crazy waiting to hear the results of the appraisal for the home I wish to 

purchase.  The listing agent does not know what the house will appraise for, and I found out in the

course of it all that the house is overpriced.  So there is a very good chance it will not meet appraisal.

 

Why on earth if you are selling a house that is in an average first time homebuyer's price bracket 

would you not find out what your home appraises for before you price it?  After all, no bank will 

finance above appraisal.  I understand if the house if priced low for an obvious flip or rental, to lure

a cash buyer or investor.  But why market and contract and wait if the appraisal will not be met?

 

I know I have seen ads where house was stated to be listed under appraised value.  That is a sure

fire way to attract a reputable buyer, especially one who was already preapproved and was ready to 

sign a contract, like myself.  

 

Any thoughts?  



Appraisals can be costly and so I'm certain that some (not all) sellers would prefer to not incur that expense considering that they are on the selling side of things. Personally, I think that I would always have some interest in how much my home is worth though and would check into it or have it appraised from time to time just to know for certain but I am a bit OCD at times though LOL Smiley Happy


Yes, appraisals are quite expensive! Any any appraisal you had done would end up being just for your own information. You can hire two different appraisers and get wildly different results, which is one of many reasons that lenders prefer to be in charge of appraisals for their own security.

 

Message 5 of 26
frugalQ
Valued Contributor

Re: Appraisals, why are they not done before contracts are made?

that is what your REA is for....to ensure your asking price is below/at market price....so when the appraisal happens, there's no surprise.  the REA should have pulled comps and done the research.

AmEx Green NPSL | Amex BCP 16K | Citi Simplicity 10k | Discover IT 9K | Chase Slate 7.5K | Amex Hilton HHonors Surpass 7K | Capital One QuickSilver 6K | Home Depot 5k | Chase Freedom 4.5K | LOC 2.5K
Message 6 of 26
Anonymous
Not applicable

Re: Appraisals, why are they not done before contracts are made?

Thank you everyone.

 

I am a first time homebuyer, and I am approved for a USDA Direct loan.  

 

I had such a frustrating experience trying to buy a home.  I made offers on 5 homes, and used two different realtors before I

found my current home that I am under contract for.  In my case, I was outbid most of the time.  On one house, the seller was

a total snob and told my realtor when they found out I had a USDA Direct loan "That I couldn't afford to buy a house".  

 

In this case, I used the listing agent to draw up the contract because I thought it may help.  This is the ONLY house that nobody

else made an offer on.  My "double" agent knew I have a USDA Direct, she requested my preapproval letter when I met with her

for the showing.  It's a total sellers market where I live, I asked her for advice about making the offer and she knew my financial 

situation.  She explained to me afterward that the home may not appraise due to the fact that it is sort of unusual and comps would

be difficult.  The home passed inspection nicely, it is in great shape for it's age.  It's just small and it sits on beautiful private lakefront.

 

I was basically desperate.  I needed a house that fit USDA Direct criterea and my preapproval contract timeline was approaching.

I pay high rent and am eager to buy a budget friendly home that the Direct provides.  I am not a traditional borrower and am stuck

between a rock and a hard place.  Homes in my price range are getting multiple bids the day they go on the market.  

Message 7 of 26
frugalQ
Valued Contributor

Re: Appraisals, why are they not done before contracts are made?

OP, i am sorry you are goign through this.  your agent knew (or should have known) when you put in the offer in the offer that it would not appraise for the contracted price.  it seems like they are trying to get more money out of you.

 

the only option you have is to wait until the appraisal come back.  If it comes in low, you should negotiate with the sellers on a new purchase price....be prepared to either come up with more $$$ as a downpayment or walk away.  but, i would definately get advice from another realtor as the listing agent seems shady.

 

imho, i think there should be a rule/law against an REA contractually obligating themselves to the borrower and the seller....just seems so wrong.

AmEx Green NPSL | Amex BCP 16K | Citi Simplicity 10k | Discover IT 9K | Chase Slate 7.5K | Amex Hilton HHonors Surpass 7K | Capital One QuickSilver 6K | Home Depot 5k | Chase Freedom 4.5K | LOC 2.5K
Message 8 of 26
ezdriver
Senior Contributor

Re: Appraisals, why are they not done before contracts are made?

Price and value are not the same thing. A seller is looking for price and a buyer is looking for value. That said, listing agents commonly "buy" listings by telling the seller(s) make-believe numbers that have little if any basis in reality. Its a game that's played betwwen sellers and listing agents. As a buyer however, it is your responsibility to do your own due diligence and make offers with which you are comfortable.

Message 9 of 26
Anonymous
Not applicable

Re: Appraisals, why are they not done before contracts are made?


@Anonymous wrote:

 Please forgive my rant about waiting for the results of my appraisal for my USDA Direct 

contract I currently am under for a home.  

 

I just thought of a question, I realized I had addressed this last year when I sold a home.

I recall asking my listing agent what my home would appraise for to make sure I was pricing 

it correctly.  In my case, the home was one I inherited and could never afford.  It was in pre-foreclosure

and I didn't stand to make a profit, I just wanted to satisfy the debt.

 

So now I am driving myself crazy waiting to hear the results of the appraisal for the home I wish to 

purchase.  The listing agent does not know what the house will appraise for, and I found out in the

course of it all that the house is overpriced.  So there is a very good chance it will not meet appraisal.

 

Why on earth if you are selling a house that is in an average first time homebuyer's price bracket 

would you not find out what your home appraises for before you price it?  After all, no bank will 

finance above appraisal.  I understand if the house if priced low for an obvious flip or rental, to lure

a cash buyer or investor.  But why market and contract and wait if the appraisal will not be met?

 

I know I have seen ads where house was stated to be listed under appraised value.  That is a sure

fire way to attract a reputable buyer, especially one who was already preapproved and was ready to 

sign a contract, like myself.  

 

Any thoughts?  


Short technical answer: Because the buyer's lender is going to make the buyer buy their own anyway, so the seller would just be eating the cost of the appraisal no matter how it turns out. Since the advent of HVCC/AIR regulation, lenders tend to stick to their own appraisal management companies and those AMC's appraiser boards, as it better protects them from agency blowback. If they fund a loan with a bunk appraisal and sell it and the loan goes bad, they can be on the hook for a buyback if it's discovered that whomever did the appraisal didn't follow the independence requirements and thus potentially inflated the value. With no knowledge of another bank's AMC, few lenders are willing to take on that risk that the other AMC or other appraiser didn't do their job. Furthermore, no reputable lender would accept a transfer of an appraisal where the original client is the seller or REA, even if it's AIR-certified, due to obvious concerns about inflation of value.

 

Real talk: It's the REA's and seller's job to at least research the comps in the area and try to come up with an accurate price. For a lack of better term, some are just incompetent or plain stupid. In other cases, there are wide variances in what people think it will appraise for, and what it actually does. An appraisal is an opinion of value which is often forgotten by many, so one person's opinion may differ from another. Sometimes it's a crappy appraisal and sometimes the REA or seller has an over-inflated view of what they think the property is worth. Sometimes it's hard to tell who is right and who is wrong :-)

Message 10 of 26
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.