Author Topic: Buying house - Low appraisal  (Read 4096 times)

el_beardo

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Buying house - Low appraisal
« on: June 21, 2015, 03:02:48 AM »
Buying a House - Appraisal came in low

4bd, 2ba, 1900sqft, 9500sqft lot. Has a nice sized landscaped yard with mature fruit trees and a big pool + spa. The yard is really nice.

List price is $520k, we offered $521 "to get it"

We did the home inspection and the house needs new roof + electrical issues for an estimated total of $15k. Pool needs resurfacing: 4k.

And now the appraisal comes in at $485k. None of the comparably sized homes in the area have sold for more than $485k. One comp out there was for a larger property for 525k. We like this one because of the nice pool and yard with fruit trees. It is in a residential area, but next to a church parking lot.

At first I was mad about the appraisal, but as I look at the comps I can't justify how I offered 35k more than the largest comp sale.

So now I'm looking at a house appraised for 485k, that needs a new roof for 15k with an accepted sale price of $521k. Seller was going to credit me 15k for roof and electrical issue at $521k, but most likely would not do it for 485k

Inside the house is dated: blue carpet, wall paper. I would need to add laminate floor + paint in addition to the roof  + electrical stuff.

Agent thinks the appraisal is very low. His complaint is that appraiser did not properly value the lot size. Lot is largest among comps, but sqft is on the low end. He says we should use it to try and get the seller to lower the price.

Appraiser had the contract price of 521k and still came in at 485k. Market is San Diego, low inventory so market is not going down. In this market appraiser could have fudged the numbers a bit, but didn't.

My concern is that the "value" isn't there. We like the house, it's close to schools, public transportation. I'm not thrilled about the church parking lot. Neighborhood is older 1965, no HOAs. Well taken care of.

any suggestions ?

Edit:
Agent's mentioned that if I hold off and pass on this property and wait longer the market might move and homes might be more expensive next year. I also own a condo we will sell once we buy the house. Agent didn't run comps on this house because he thought it would go fast and there would be no problem with appraisal. We do have an appraisal contingency.

« Last Edit: June 21, 2015, 03:09:24 AM by el_beardo »

Pigeon

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Re: Buying house - Low appraisal
« Reply #1 on: June 21, 2015, 03:33:40 AM »
I think you can try to negotiate, but if you can get out of the contract without penalty, that would be your best bet. Didn't run comps, you must be kidding me. A lot would depend on how long the house was on the market, I would guess as to whether the seller has any motivation to come down much.

The yard being nice wouldn't matter much in price around here and pools don't add much to the sale price of a a house. In fact, they usually are a wash. Backing up to a parking lot would also not be a positive

Paint is cheap, I wouldn't factor that into my mental equation. I like laminate floors, but many people don't and I would not put them in a half million dollar home unless that is standard in your market.

SnackDog

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Re: Buying house - Low appraisal
« Reply #2 on: June 21, 2015, 04:27:27 AM »
Your appraiser is saving your butt.  Drop to his price. If the seller doesn't like it, bail out and find another house.   On the next one, carefully check the comps before offering.  Take anything your realtor says with a grain of salt - he is looking out for his commission.   Agent gave you bad advice on pricing - look for a better agent.

MayDay

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Re: Buying house - Low appraisal
« Reply #3 on: June 21, 2015, 05:38:54 AM »
We just went through this as sellers.

Contract price was 257-2k roof credit, appraisal came in at 250. We agreed on 252 with no roof credit.

Our realtor thought 257 was about the highest we'd get for the house, and was surprised the appraisal was low, as the neighborhood was full of similar houses and comps supported our price.

forummm

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Re: Buying house - Low appraisal
« Reply #4 on: June 21, 2015, 05:57:00 AM »
Your $400 appraisal insurance policy is paying off. Either pay the new price minus the repair costs the inspector found, or walk. There are other houses out there.

Rural

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Re: Buying house - Low appraisal
« Reply #5 on: June 21, 2015, 06:49:26 AM »
Buy that appraiser a beer and find a new agent.

Another Reader

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Re: Buying house - Low appraisal
« Reply #6 on: June 21, 2015, 07:04:49 AM »
This is San Diego. It will sell tomorrow to someone else who will pay the difference in cash to get it.

However, with the amount of work it needs and the negative of an adjacent non-residential parking lot, I would think twice about whether this is worth paying top dollar and then dumping in a lot more money.  Does the roof have to be done to get financing?  If so, that issue has to be resolved at the expense of the seller anyway.  If it is old but watertight, it's only useful for negotiation.

Now that you are past the urgent offer psychology, sit down and figure out what you are reasonably willing to pay, given the house's defects.  Write your counter based on that, and be firm.  My response to "it's the perfect house for us" is that houses are like buses.  If you miss one, another will be along in 15 minutes.  And houses may be the same price or less expensive next year, because mortgage rates are going up.

el_beardo

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Re: Buying house - Low appraisal
« Reply #7 on: June 21, 2015, 08:34:00 AM »
Thanks for all your responses.

The roof is original and not water tight. It has to get fixed before the next rainy season ( drought not withstanding). On the other hand not every house out there has a new roof.

This is the 4th house we've put offers on, (we seem to like a lot of them)- we are not in a hurry to buy and we can certainly wait for the off-season. I would like to stay at around 500k price range. It's easy to go higher around here.

We made our offer as soon as it came on the market because the house seems much nicer than the ones in the surrounding area and didn't think it would last. We had no idea on the roof and I estimated 5k to add flooring. We knew we might be going a little bit above value.

Full mustachian disclosure: I would be living 30+ miles from work

CashFlowDiaries

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Re: Buying house - Low appraisal
« Reply #8 on: June 21, 2015, 08:39:15 AM »
"Agent's mentioned that if I hold off and pass on this property and wait longer the market might move and homes might be more expensive next year."

Your agent clearly just wants to make the sale so they can get paid.  This is the problem with most buyer's agents these days.  It seems that they are not looking for your best interests when that is exactly what they should be doing.  The realtor should have told you exactly all the info you are getting from us.  Dont buy it unless you get it at appraisal cost minus the repairs.

Like MMM says, there are tons of other properties out there and new ones listed each day.  Patience is key. 

el_beardo

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Re: Buying house - Low appraisal
« Reply #9 on: June 21, 2015, 09:18:42 AM »
"Agent's mentioned that if I hold off and pass on this property and wait longer the market might move and homes might be more expensive next year."

Yes, this part bothered me - I own a condo if prices increase I'm kind of already hedged by being part of the market. Of course I would prefer prices stay the same or dropped, but "prices might increase" should not be a reason to buy. Ultimately a house is appraised today.

That said we did like the house, and we can use the low appraisal to get an even lower price.

forummm

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Re: Buying house - Low appraisal
« Reply #10 on: June 21, 2015, 10:22:37 AM »
Usually an appraisal for a mortgage will come back with the exact dollar amount on the contract. If it's below, it's because they couldn't come close to justifying the price.

el_beardo

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Re: Buying house - Low appraisal
« Reply #11 on: June 21, 2015, 01:20:26 PM »
Realtor always says the same thing - the appraiser will "make it work". In this case it's 35k lower, not counting the roof.

Usually an appraisal for a mortgage will come back with the exact dollar amount on the contract. If it's below, it's because they couldn't come close to justifying the price.

NoNonsenseLandlord

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Re: Buying house - Low appraisal
« Reply #12 on: June 21, 2015, 08:26:36 PM »
Get a different realtor and pass on the house.

fishnfool

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Re: Buying house - Low appraisal
« Reply #13 on: June 21, 2015, 08:45:17 PM »
If it were me and I really liked the house as you say you do, I'd offer the seller the $485K and take care of the repairs myself. You might be able to get the house re-roofed for less than $15k too. By the time you get it all fixed up it'll probably be worth way more than you have invested in it.

If they won't come down to meet the appraised value I'd walk away from this deal..... It wasn't meant to be!