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First Time Home Buyer Needs Educated On Appraisals

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darla brown

Freshman Member
Joined
May 6, 2003
:unsure: I am a first timer, and I was told today by my lender that the appraisal came in at a little less than expected. She went on to say that on VA loans they don't get to pick the appraiser. My question is simple... If the appraisal comes in less than the asking price of the home, does the current owner have to lower his price? Or does the lender rufuse to finance?

Someone please enlighten me ;)
 

Bill_FL

Senior Member
Joined
Aug 23, 2002
Professional Status
Certified General Appraiser
State
Florida
Darla,

First. You need to thank that appraiser. Did you catch what you wrote? The lender told you that they did not get to pick the appraiser? Hmm. If they had, does that mean their appraiser would have met the contract price, even if that meant you paid too much for the home? How does that make you feel about your friendly mortgage person? Does he/she have your best interests at heart? Does not sound like it.

I am no lawyer, but I will tell you what I have seen in the past. There are several senarios that can now play out. One, most contracts give the buyer the option to back out if the home does not appraise. Two, the appraisal could be used as a negotiating tool. Does the seller have to lower their price? Not usually, unless you had that written into the contract. Third, you could pay cash difference for the home if you want it that bad. Normally, the lender will not lend over the purchase price or appraised value, which ever is less.

There may be some other options that one of the VA experts here might be able to help you with, but normally, those are the senarios I have seen in the past.
 

wyecoyote

Senior Member
Joined
Jan 15, 2002
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Washington
Darla,

Bill has it right on. Now you have to go back and decide to either renegotiate the sales price or come up with the difference. Would you rather pay a few hundred dollars to know now that the house is worth alot less than what you were willing to buy it for. I don't know what the difference in the price was but to me know it must be negotiated between you and the seller or look for a different house. Think long and hard about wether or not the LO had your best interest at heart when you purchased the house. A house purchase is a really big step in life.

Ryan
 

Chad J. Houser

Freshman Member
Joined
Jan 31, 2002
Professional Status
Licensed Appraiser
State
Georgia
Darla;

I've only been appraising for a couple years, so I certainly can't claim to be an expert. Especially in the realm of VA loans. However, my wife and I purchased our home shortly before I began fee appraising. Boy do I wish that I knew then what I know now. We negotiated a fair price, but only because a good friend of mine appraised the house for the sale -- one I trust implicitly. Bob has hit the nail on the head. You only have those three options : renegotiate, walk, or cough up some cash. It all depends on how badly you want the house, and how long you're willing to wait to have any significant equity. Best of Luck.
 

Tom McDowell

Member
Joined
Jan 19, 2003
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
North Carolina
The seller has a few options, most of which have already been discussed. If he decides not to take the appraisal he won't get another Notice of Value (NOV) for 6 months. He can appeal the appraisal if he has other comparable sales. He can give them to the lender and they will pass them along to the appraiser for his consideration. If that does not work the seller can file an appeal with the VA. Keep in mind that the lenders SAR can raise the NOV by 2% with out the VA approval.

One quick question, are you going to finance your VA funding fee? If so that means you are going to finance either 1 1/2% to 3% more than the appraised price then if the lender tacks another 2% to the appraisal, well you see where this is going. Lets assume an NOV of $100,000 plus 1 1/2% funding fee plus 2% SAR increase = $106,600 rounded. At 2% growth per year that means after 3 years the property value would be about $113,400. If you list your property with a real estate broker, plus the closing costs, you will probably be asked to pay, you can expect a 9% marketing expense of $10,200 it would cost you $116,800 to sell the house you would have to bring $3,400 to closing. This does not take into account the amount of the principal you will pay down in 3 years. It won't be much.

Remember these figures are estimates only. Your area may may not experience a 2% growth. Some areas actually decrease in value.

please pardon the grammar.
 

Smokehouse

Junior Member
Joined
May 7, 2003
Professional Status
Certified Residential Appraiser
State
Florida
As a real estate agent, those are the options that you have as stated above. Usually a seller will negotiate with you, it is always nice as a seller to have a contract in hand and not the prospect of another month or two of holding costs. In other words, if the value is just shy of what it is needed to be, more than llikely the seller will negotiate with you because if they have to wait another month or two to get another offer, that may be less than yours, they have to factor in the costs of owning the house the extra 2 months. Mortg payments, water, elec, lawn care etc....

A contract in hand is better than a for sale sign in the yard...


The appraiser did you a favor by showing that you were going to pay more for the house than what it is worth, that will also stick in the sellers mind as well. He or she will know if they don't negotiate, then they will probably have this same problem when and if the next contract comes in. If you want the house that badly and the difference is not all that much, maybe you could split the difference and pay cash at closing or ask for more repair allowance etc.....Negotiate...Negotiate...Negotiate
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
The signed and closed sale contract on the table is better than re-planting the for-sale sign in the yard.......in many places these days. As said by others, extend a subtle "Thanks" to that appraiser. Read all that handwriting that was on the walls. For some sellers, backed and supported by very aggressive realty agents, the power of greed over-shadows any real common sense to sell....and be done with it. Some will hang on to that higher price, not negotiate, and as a result also hang on to the house they actually had intended to SELL. That is why they put out that sign and engaged that realty agent ! One does not know here just how much difference there was between the offering price and the appraised value opinion. Hopefully you have representative support to assist you in meeting the other party somewhere "in the middle".
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Kendall,
Wow, it's nice and refreshing to get an honet answer from an active RE agent, rather than ranting and raving that the appraiser is an idiot! If you offer honest and good service like that, I'd bet that you are more bizzy than you want.
 

RB

Freshman Member
Joined
Apr 15, 2003
Professional Status
Certified Residential Appraiser
State
Oklahoma
Darla,

I agree with many of the posts I've read regarding your matter. It's refreshing to hear positive words from Kendall (realtor), as it is usually the other way around.......the realtors are normally against the VA appraiser.

As a VA appraiser, I can tell you that most lenders and realtors I deal with on VA assignments are just beside themselves with contempt and pent up anger because they know their little game of applying pressure to hit predetermined values (AKA Fraud) will not fly me. They cannot pick their "Favorite Appraiser" on VA loans..........oh how they wish they could. They know they can do nothing about the veteran opting to use his/her well earned VA preference because if the lender or realtor were to attempt to "Steer" the borrower away from VA lending because of the aforementioned reasons......well you can image the "Federal" violations of law they could face, including prison. I am glad to see that VA has maintained a panel of appraisers, as it is my experience as a HUD REAC review appraiser that the FHA appraisal quality has taken a very evident downturn since appx 1996 when the "Lender Select" roster was put in place. Among many other observed violations and unacceptable appraisal techniques and practices I have seen, HUD might as well do away with the VC sheet, because many appraisers are intentionally failing to disclosing negative property conditions in order to maintain their "business" relationship with lender/realtor. Unless HUD conducts a Level 2 or 3 review, nobody will ever know about negative conditions because the only professional who might be in a position to discover negative property conditions is the home inspector, however it is my experience that they are also working for the realtor/lender in most cases. If the home inspectors find something negative, do you think the lender or realtor informs the appraiser? I can't tell you how many times during appraisal review I've noted unintentional photo angles of the subject property clearly depicting negative conditions, however the appraiser boldly notes in his/her report "subject is in overall average to good condition, has been well maintained and requires no repairs". There is nothing wrong with the concept of the Lender Select Roster, however the appraisal assignments should be "ROTATED" - as HUD used to do and how VA still does. That way, if or when you come in low on value or perhaps make repair necessary requirements in the process of delivering an honest and ethical professional report, you are relieved from the pressures of getting "Cut Off" by the lender and the realtor "Back Balling" and slandering you to lenders and others in the business. I harbor the same common sense opinion about our nations tax dilemma......... why not just apply a flat tax rate across the board on gross income, that way everyone pays their fair share.

It is really a shame to see the destruction of our profession by a growing number of appraisers across the country who choose to and shamelessly operate under the guides of fraud, deception and greed. Oh well, they'll get theirs in the end.

Oh .........don't get me started on Conventional appraising and refi's.

RB
 
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