Desk Appraisal is killing deal - 1 day before signing - HELP!

[schnieds]

Hi,

We are the sellers in a very unfortunate situation right now and I am looking for some real estate and/or legal advice.

We purchased our home in Northern California in Dec 2008 for $400K. Since moving in, we have made the following improvements:
- New 40 year composite roof
- New external AC compressor & upgraded HVAC venting, etc.
- New sprinkler system, front & back
- New stainless steel appliances
- New safety pool fence
- Upgraded landscaping
- Various other interior & exterior upgrades/improvements

In July of this year I received a promotion into management at work and a request that I relocate to another company location so we put our house on the market. We listed it at $440K to cover the closing costs and figured that all of our improvements were worth the extra value as well as the fact that our home is in an area where the home values have remained relatively stable.

We received an full listing price offer 6 days after listing our home. The sale process started and the lender ordered an appraisal. The appraisal came back at $440K and everything was all set.

Since the appraisal was finished and we agreed to a list of repairs with the buyers, the transaction has proceeded. We made arrangements for the move such as packing all of our belongings, selling a lot of items that we didn't want to move, leasing a home in the area we are moving to and fixing the repair items agreed to.

We were scheduled to sign papers today (8/27/09). However, yesterday (8/26/09) our real estate agent received a call from the buyer's agent that the lender performed a desk appraisal on 8/25/09 that came out to $380K and the bank would not fund the buyers loan! After everyone raised a big stink the lender is sending out a field reviewer to check the work of the original appraisal.

Quick Summary:
- House sold for $440K on 7/31/09
- House appraised at $440K on 8/6/09
- Contingency removal on 8/12/09
- Desk appraisal on 8/25/09 of $380
- Field reviewer coming out soon

My questions:

1) I stand to lose $7500 right now if this deal falls through ($4K on new rental lease, $3K on repairs, $500 travel expenses). Do I have any recourse as the seller? I waited until the last minute (last Friday) to sign the rental lease and was assured at the time this was a done deal.

2) Is it legal for the bank to override the original appraisal one day before signing?

3) Am I entitled to the earnest money in this scenario? Which appraisal is the valid one?

Thank you for your help and comments, we are in a very bad position right now and I need any good advice that I can get.

 

[Calvin the Airedale]

Hi,

We are the sellers in a very unfortunate situation right now and I am looking for some real estate and/or legal advice.

We purchased our home in Northern California in Dec 2008 for $400K. Since moving in, we have made the following improvements:
- New 40 year composite roof
- New external AC compressor & upgraded HVAC venting, etc.
- New sprinkler system, front & back
- New stainless steel appliances
- New safety pool fence
- Upgraded landscaping
- Various other interior & exterior upgrades/improvements

In July of this year I received a promotion into management at work and a request that I relocate to another company location so we put our house on the market. We listed it at $440K to cover the closing costs and figured that all of our improvements were worth the extra value as well as the fact that our home is in an area where the home values have remained relatively stable.

We received an full listing price offer 6 days after listing our home. The sale process started and the lender ordered an appraisal. The appraisal came back at $440K and everything was all set.

Since the appraisal was finished and we agreed to a list of repairs with the buyers, the transaction has proceeded. We made arrangements for the move such as packing all of our belongings, selling a lot of items that we didn't want to move, leasing a home in the area we are moving to and fixing the repair items agreed to.

We were scheduled to sign papers today (8/27/09). However, yesterday (8/26/09) our real estate agent received a call from the buyer's agent that the lender performed a desk appraisal on 8/25/09 that came out to $380K and the bank would not fund the buyers loan! After everyone raised a big stink the lender is sending out a field reviewer to check the work of the original appraisal.

Quick Summary:
- House sold for $440K on 7/31/09
- House appraised at $440K on 8/6/09
- Contingency removal on 8/12/09
- Desk appraisal on 8/25/09 of $380
- Field reviewer coming out soon

My questions:

1) I stand to lose $7500 right now if this deal falls through ($4K on new rental lease, $3K on repairs, $500 travel expenses). Do I have any recourse as the seller? I waited until the last minute (last Friday) to sign the rental lease and was assured at the time this was a done deal.

2) Is it legal for the bank to override the original appraisal one day before signing?

3) Am I entitled to the earnest money in this scenario? Which appraisal is the valid one?

Thank you for your help and comments, we are in a very bad position right now and I need any good advice that I can get.

All your questions are asking for legal advice, but most of us are just appraisers on this forum. You really should pay an attorney for answers to these questions.

Like most dilemmas, I suspect you and we do not know the entire story. Be that as it may, yours is not an unfamiliar tale anymore, given the conditions to which many markets have deteriorated. Good luck!

 

[Lloyd Bonafide]

Your story is very common these days. One of the appraisers is probably way off the mark. All you can hope for is that the field reviewer is competent, (not a sure thing), and that they agree with the sale price.

 

[Bigrock]

Since the contigencies are over, you get to keep the Deposit...

Because the buyers lender does not want to loan the money is not your concern, the buyer can make up the difference in some other way.

You can also take a second for the difference..

What bank - Lender did the borrower use and who did the sdesk review and who did the original appraisal?

Was the same person who did the appraisal - inspection the same persone who signed the appraisal? did the original appraiser just hit the number?

Was a AMC involved,,,Was the reviewer even in your state?

Too many unknowns to say how to proceed...

BUT MAKE SURE YOU GET THE BUYERS CASH SINCE THE CONTIGENCY IS OFF...

You may want to hire a local competent appraiser to consult with you,,the fee should be around $200-$400 and is worth it...

Please post more info

 

[Paul Isolda]

I'll answer the only real issue that an appraiser can answer. The reliability of a desk top appraisal is almost always much lower than the reliability of a full physical appraisal. Assuming, of course, the full appraisal was performed by a competent professional and not a skippy. Ask to have another full appraisal done asap, pay for it if you have to. A slightly delayed closing, I would think, would be much better than a dead deal.

 

[Randolph Kinney]

2) Is it legal for the bank to override the original appraisal one day before signing?

Yes, the bank has not approved the loan. The first appraisal is just that. The second appraisal contradicted the first appraisal.

At least the lender is doing due diligence and is having a field review appraisal done. If this appraisal confirms the first appraisal, the loan will fund and you can close escrow. All is not lost, yet.

 

[TJSum]

As others have stated, a lawyer should be consulted to answer your questions. One thing to look into would be to find out where the desk reviewer is located, and if they are licensed to conduct appraisals in your state. If this is a national lender, the desk reviewer could be located thousands of miles away.

 

[Smokey Bear]

What city is the property located in?

So the first appraisal "hit the mark" and the second one didn't. Did you have the house appraised yourself before listing? Without seeing the appraisals there's no way to know if either of them was any good or not. I'd question both of them.

That said, you were not the client for the appraisals, the bank has the right to turn down the loan, and the appraisal wasn't for your benefit.

Some things to look at: (you still need a lawyer, this isn't legal advice) Hopefully the field review will determine whether the first appraisal was legit or just using the purchase price for target practice. Pray that they're actually using a competent appraiser for the field review.

If that doesn't get the loan on track:

If the loan contingency has been removed, not getting the loan isn't an excuse to not finish the purchase. If you are willing to wait, they can go for another lender.

If the loan contingency hasn't been removed, review your contract to see if the contingency specified a particular lender. If not, they can still go for another lender.

Get an appraisal done on the property yourself to see if the property was priced properly in the first place. Let us know what city you're in and we can recommend someone who will not be swayed by the purchase price - it's interesting that the first appraiser hit the purchase price exactly.

Have you considered that the lender didn't want to do the deal for some other reason and is blaming the appraisal? Has the borrower actually received a copy of the appraisal like they're supposed to under the HVCC (3 days prior to the closing, they have a right to a copy of the appraisal.) If the desk appraisal was used to deny the loan, it seems like they might have a right to a copy of that as well. Chances are real good that the 'desk appraisal' was not a real appraisal.

Anyway, if the buyer backs out, you can sue, but believe me when I tell you that there are NO winners in a lawsuit. If the loan contingency has been removed, you probably have the right to keep their earnest money deposit (you DID get a decent sized deposit, right?) and sue in small claims court for the remainder of your losses, but you won't know your total losses until you sell the property, because it might not sell for as much as this contract.

You really need to talk with a lawyer if the field review doesn't get the loan going through.

 

[Bigrock]

remember, you are not out 7K..

You get to keep the deposit,, make sure your RE Agent knows you are planning on keeping it...

That is part of the deal...

See if you can find out who the lender is and if they are using a AMC appraiser-IE number hitter, out of state desk reviewer..etc...

 

[Lloyd Bonafide]

Has the borrower actually received a copy of the appraisal like they're supposed to under the HVCC (3 days prior to the closing, they have a right to a copy of the appraisal.) If the desk appraisal was used to deny the loan, it seems like they might have a right to a copy of that as well. Chances are real good that the 'desk appraisal' was not a real appraisal.

The borrower should have a copy of the appraisal, (hopefully a PDF). When a value comes in below the sale price, the sellers agent will usually be forwarded the appraisal from the buyers' agent. Then your agent can send it to you. Then you can post the PDF here, so we can all look at it. :icon_mrgreen: