Wrong sales price used on appraisal

[Violet]

I'm a buyer under contract on a house. The appraisal came back with my lowball initial offer used as the sales price rather than the final contract price, and the appraiser valued the home really low, nearly 15% lower than the amount I need to get a mortgage on it. The bank went back to the appraisal company to get them to correct it, but the only thing that the appraiser was willing to change was the sales price. The comps used and total appraised value are all exactly the same; the appraisal is completely identical except for the sales price. My realtor has asked that the bank order another appraisal, but the loan officer says that will not help since they have to use the lowest one.

There was another appraisal performed on the house less than six weeks ago and it appraised above the sales price, but I was unable to get a mortgage through that bank because the house needs minor repairs (burglar bars removed and siding patched.)

The appraisal company is justifying their refusal to budge by saying that sales price does not affect appraisal value, but I find it pretty hard to believe that their using the wrong price wasn't a factor in this case.

I really want to buy the house and it's looking like the deal will fall apart. Does anyone have any advice for me?

Thank you.

 

[BRCJR]

The bank/lender does not have to use the lowest appraisal, matter of fact the regulators would have a problem with that. They are required to use the one deemed most credible, period.

 

[residentialguy]

If the appraisal came in at what he thought the contract price was, that means he placed weight on the fact that you are part of the market. Now he doesn't want to eat crow. I wonder if he found out that the comps he used were 15% higher, he would have a change of heart. He won't see it that way.

So...what to do.
If the seller won't lower the price, I'd ask the lender for a new appraisal.
If the lender won't get a new appraisal, then I suggest you get a new lender. Hopefully it wasn't a FHA finance (the appraisal for FHA follows you if you switch lenders).

 

[NORTON]

what was the situation around the change in contract price? why was the price increased by such a large amount? did u think the house was only worth the original price? do the original comps truly reflect a lower market value than what u were willing to increase to? if so, what logical view point can u provide that the original comps are poor choices? thanks.

 

[Violet]

Norton, the initial offer was low because it was, well, an initial offer. My realtor advised me to offer a low starting bid; I never would have gone that low on my own. It's not like we expected the seller to just accept the initial offer--it was just a starting point in negotiation. The final contract price is 9% below what the listing price was, so the seller came down some. Also, of the three sold comps used, one was REO and another was a short sale.

Residentialguy, it's not an FHA appraisal, but I don't have time to go to a new lender since the contract expires in just over three weeks. It was already extended once because I had to switch lenders and the seller is unwilling to extend it again (and I don't blame them--we've been under contract for two months at this point).

 

[Smokey Bear]

Who provided the appraiser with a copy of the contract? It should have been signed by both buyer and seller, so the initial offer shouldn't have been the 'contract price' on the appraisal, but should have been mentioned in the contract analysis section. Regardless, the comps are more relevant as they represent closed sales, and your sale hasn't closed. Aren't you concerned that you might be overpaying for the house?

 

[NORTON]

Well ,some interesting variables all coming together here. First, is this home a short sale? you coming up 15% and the seller coming down 9% equates to this property was obviously overpriced although that's not relevant to your situation. The original appraiser is in a pickle of his own doing. If the property really had a much higher value, then that should have been realized during the appraisal process although the appraiser was likely fearful of coming in too high for the bank to understand without questioning it thus the appraiser matched the contract price, to keep all parties smiling. Now, the appraiser has no logical reasoning for changing his / her opinion of value thus painted into a corner. Couple of questions, who is your new lender? how much did u pay for the appraisal?

 

[Violet]

Norton, the lender is Wells Fargo and the fee was $481. It's not a short sale, but the seller is an investor who bought it as a foreclosure at auction, which is not helping the situation I'm sure.

Smokey Bear, I would assume the lender provides the appraiser with the sales contract, but I actually do not know. You're an appraiser--how do you normally get the sales contract? You are correct that the only thing that had both signatures on it was the final contract, but the initial offer had to be included because it was the only document that contained the seller concessions and all the other terms on the contract. The only thing that significantly changed was price. At this point I am worried that I could be trying to overpay for the house, but on the other hand I do have an appraisal not six weeks old from when I was trying to get a mortgage from another bank that came in over the final contract price. If you're thinking that this second appraisal that used the wrong sales price is more accurate, then what does that say about the first one?

The contract analysis doesn't say anything beyond "arms-length transaction; Current contract on the subject for $X between Seller and Buyer." Again, the only thing that changed was the amount.

Thanks for all the responses.

 

[residentialguy]

you coming up 15% and the seller coming down 9% equates to this property was obviously overpriced although that's not relevant to your situation.

How in the world do you get that? This is a buyer's market. Buyers will always bid low and meet in the middle.

Now, the appraiser has no logical reasoning for changing his / her opinion of value thus painted into a corner.

The appraiser has reason. Change of the value was because there was a change in market data. 3 sales and the appraiser used a short sale and a REO??? How bad is this neighborhood? Is that all the sales he could choose from?

Anyway, back to OP. The only thing you can do is tell the lender you want another appraisal with comps that aren't under undue stimulus.

 

[Mary Tiernan]

Original poster states there was a prior appraisal completed 6 weeks prior with a higher value opinion.

The appraiser's job is to provide an opinion of value.

This should be based on sales data within the neighborhood. The appraisal report should clearly define the neighborhood and summarize the sales activity that has occurred over the past 1-5 years.

Sales selected should be based on the theory of substitution, not a preconceived number.

Unfortunately, not every appraiser does this properly.

Do you have a copy of both appraisals? If not, can you get a copy of both?

You need to sit down for a couple hours and do some research based on both reports. Look at the sales utilized in both appraisals and try to determine which report uses sales which are in direct competition with your potential home. Get teh addresses for all sales used in both appraisals, drive by them. Are they all similar in design, appeal and condition? Which sales are truly competitive to your potential home?

If you find that the sales utilized in the first appraisal are actually more comparable to the house you want to buy, you may submit a "value reconsieration request" to your current lender and request that the sales utilized in the first appraisal be considered by the second appraiser.

Just because the first appraisal came in higher does not mean it is correct.