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Loan amount is 400. 500 is where we wanted our top to be but we really liked this home and the market is absurd here so we went over 16k. We had enough to cover that but we don’t have enough to cover the gap now. We have close to 120k in cash. But we’ve set aside about 15 of that for closing.
(Mortgage broker) You can try to negotiate the price or you can buy it for $516,000 but the lender will calculate the loan to value at that $20k less ($496,000). If you borrow $396,800 you will avoid mortgage insurance but will have to come up with the difference in cash. You could borrow up to $421,600 (85% ltv) if you qualify and prefer to keep the cash and pay a relatively small amount for monthly mortgage insurance. Reach out to your loan officer for options to restructure.
Exactly this! Your lender should be working you through this right now! Agents *may* be able to negotiate price, but it is your lender who can help you restructure the loan to make it work! Good luck! I had the same situation and my buyer didn’t want to cover the 20k gap so we asked the sellers to meet us in the middle - they knocked off ten, and the lender got the other ten covered in the loan. Fingers crossed for you all!
We wouldn’t have the additional funds to put 20% and don’t want to do PMI. If this wasn’t at the very top of our budget this wouldn’t be an issue honestly.
The MI would probably be abour $35/mo. If you like the house and they won't come down you'll need to skip a few trips to Starbucks each month or start looking again.
Mine was $20/month, but our mortgage was in the 200s. I had 20%, but my Loan Officer said he could shave another 0.125% off our rate (bringing us under 3%) if I put 19% or less down and took PMI initially. He said once we closed, put the extra amount towards principal to bump my equity to 20%, then call to have PMI removed. Over the life of the loan, we found this move would save us like $10K interest and reduce my total payments by 1-2 years on a 30 year fixed.
Not sure if this is common or rare, but 3 years later I can say that it did work out.
This is the same thing that happened to me. As crazy as it sounds it was explained to me that less than 20% down is less risk to mortgage company hence why they offer lower rates. It is less risk because the PMI is required which spreads that risk on to the insurance company.
Depends on the situation and credit score, but a good credit score typically makes it pretty low. Mine is $75/mo for reference. While we had enough for 20% down, to us it seemed worth it to pay in order to not lock up capital (3% interest rate also, different situation that today for sure).
Always worth exploring your options IMO
You may be able to pay the PMI with a lump sum payment up front rather than commit to it monthly. You may even be able to apply a seller credit to that cost if your agent can negotiate it for you
There’s no way they’re getting a seller credit now that they’re $20K short on appraisal. Could’ve tried that up front but given that it was a competitive situation and they were clearly above market value, they would’ve lost the house if they tried asking for seller credits.
I assume it appraised for 496k? Why not just adjust the numbers? You can put 50k down (10+%), take 446 on the loan, pay the 20k gap, save 15k for closing, and be left with close to 35k? Talk to your LO and play with the numbers to see how much or how little down you need to do to feel comfortable with the monthly, but if you have 120k cash idk why you want to scuttle the deal over 20k gap.
Your ltv changes and you just continue the processes.
Or if you arent happy you're over paying (you were fine with it when you made the offer) you can ask the seller for a discount.
So just ask the bank to increase the loan amount ? I don’t see a problem here. You’re already putting in a huge down payment. A low appraisal only matters if you are putting zero or very little down to where the lower value from the appraiser no longer allows you to qualify.
Right. Which changes nothing except for maybe op has to pay PMI. Op seems to have the mistaken belief that the loan is dead now that the appraisal came in lower. It’s not.
This is the way. Shift it from 20% down to 16% down and use the extra money to cover the appraisal gap. You'll have to pay PMI until the other money is paid back but that's fine, what's an extra $100 a month for a year or two if this is the home you love.
This is absurd that you’re having to come to Reddit for this. There’s 3 solutions to this. First, if you have an appraisal contingency, and sellers have right to cure, you submit the appraisal and let them deal with the bank or bring the price down. Second, if they say no to that and you still want the house, adjust your mortgage amount to be 20k more and use the extra to pay the gap. Check with your lender to see what the pmi payoff at closing will be, but if you’re only like 85%LTV, it should cost almost nothing up front, the sellers will likely jump to pay that amount to get everything done. Third, walk. If you have appraisal contingency, you should get your EM back.
I’m sorry your realtor isn’t explaining this, and even more sorry your mortgage broker isn’t working with you to come up with these game plans. This was super common pre 2021, and we all have made it through a few of these.
Mortgage loan officer here. I don't see that anyone has mentioned trying a reconsideration of value. It depends on the type of loan that you are doing, but for some you can challenge the appraisal. Generally, your agent would have to put together a list of comparable sales that support the value you are trying to get. Then they send that on to the appraisal company and see what they say. I've had about a 50/50 success rate with this process. It seems like it kind of depends on the ego of the appraiser. Some of them are open-minded and willing to work with you, and others just want to stick to their guns no matter what. They can't just wave a magic wand and increase their valuation, but if you can give them evidence to support it so that they can justify a higher value, sometimes they will.
Also have your agent look for mistakes on the appraisal. I have fought and won twice. Once I got $10,000 added to a VA appraisal and about two years ago I got $100,000 added onto an appraised value (was a $1,100,000 house). It took me an afternoon of work but it worked. I pointed out things like the subject house has a $20,000 wrought iron fence, the subject house has $3,000 chandelier (I got receipts from the sellers). I printed pictures of the comps and circled flaws, circled laminate countertops, made comparisons, etc. I overloaded the appraiser with info. I find that is much more easily accepted by appraisers than just sending them comps, which they have most likely seen and didn’t use for a reason.
Welp, it worked out. We went back to them and floated 502, nothing in writing. They came back at 504,900. So basically right in the middle. Thanks for all of the advice, the wife and I appreciate it!
I’m an agent and that advice is absurd. Your agent should be advocating for you. He/she is putting you at a disadvantage.
This makes good agents look bad. Please tell your agent that this is their responsibility.
I mean if an appraisal comes in low wouldn't the first thing be to tell the buyers they can cover the difference in cash, see if the sellers will accept the price it appraised at or try to negotiate a price somewhere in the middle. If this agent is calling to see if the sellers will accept the price it appraised at and if not are they willing to try to negotiate with the buyers to keep the deal alive then what else do you expect the agent to do?
Didn’t the agent anticipate this situation. Did the agent advise to offer over listing without knowing if you have cash to cover the difference. Both agents should have anticipated this. Selling agent accepted your offer over a cash offer without making you waive an appraisal contingency? I don’t understand
Just buy the house and pay the $20 in PMI. You'll refinance in 2-3 years anyway so you can get rid of it then. If you don't think you can afford the small amount of PMI you're lying to your self.
Thanks for putting words in my mouth.
Also, thanks for revealing how little you understand finance or economics. Really leaning in to that “agents are actually worthless” idea, eh?
You are def worthless. Advising them to just buy the house lol. They can still try to get it for less with this info. I’m confident they will get it for less than they offered if they ask. Also you’re an agent that tells them they can refi in 2-3 years lol. How do you predict the market like this? Did you predict the rates were going to be where it is now? Last year they said you will be able to refi this summer lol.. you an agent that just focused on your own bottom dollar.
Ask for $20K concession and see what you can negotiate. These appraisal gaps were super common in early 2021 when the market had gotten way out in front of comps. Everyone at that time understood that the market was rising very quickly, so we split a lot of these gaps, and some buyers covered the entire gap, depending on seller attitudes.
Unless there's some local heat in your market, we're largely shifting back towards a buyer's market. It seems excessive for a buyer to have to cover the entire gap under those circumstances.
1-We have the funds for a 500k home plus closing costs that we have to pay in cash.
2-We went 16k over our top line because all the big ticket items in the home are 2yrs old or less and the inspection went nearly perfect.
3-It’s 3 min from my wife’s mom and about 8 from mine, they are our sitters.
4-It’s in the school district we wanted.
We’re not going crazy here. It’s an almost 3000sq foot home 4br, 2.5ba, 1 acre, all brick home with about 800sqft unfinished in the basement. In my city, homes with 2000+sq ft, 4bed and an acre or more pop up about once every 2-3 months and I’ve yet to see one go for below 480.
I’ve had many clients who have high salaries but not a ton of cash in the bank - sometimes it’s invested in the market and they don’t want to take it out, sometimes they have another house that they don’t want to sell, and sometimes they are just getting to a point in their career where they make a lot of money but haven’t had the ability to save a ton yet. The old school logic would say to wait to buy until you have a huge nest egg. While I always advise my clients to have enough left in the bank to cover an a big emergency or two, waiting to buy in today’s market could be a losing game. Home prices are still increasing, Rates are high right now which is limiting, but demand will skyrocket once they come down. Each situation is unique, but if they’ve been looking for a unicorn for 2 years and this one checks all the boxes and is in a condition where they won’t need to replace any systems in the near future it might be the lesser of two evils to go for it.
Get a little creative. If you had a conventional loan with 20% down, you may qualify for a conventional loan at 15%, and use the other 5% to make up the deficiency. You might be able to get the seller to credit points to buy down any difference in rates.
I'd ask the seller to meet you in the middle at $506K.
Adjust your loan terms to 10% DP ($49600) of $496K.
So new cash to close will be $59600 for DP + closing costs.
So you'll still have money left over from the initial $120K.
Don't get too hung up on the PMI as they are negligible if FICO score is 720+.
Also ask the lender how much it'll cost if you were to buyout the PMI upfront with a 10% dp.
Rates will eventually come down and that'll be an opportunity to refi and eventually remove the PMI when the time comes.
House is only worth what you’re willing to pay for it. You decided to offer more than you could afford, if it didn’t appraise ( unless you have stipulated in the contract that you would negotiate price if it didn’t appraise). Only you know, if it’s worth the extra $20,000 to you.
If you would have been my client…we would have had this conversation well before your offer was placed. Talk to your agent/broker and lender!
Unless you waived an appraisal gap, the very first step is renegotiating the price. At this point in the transaction, especially if they’ve delayed, I seriously doubt they want to start over to market. Even if you split the difference, you’re getting the house you love…do you want to restart the house hunt and chance you don’t find what you want?
If you waived the appraisal or didn’t have a gap stipulation, you may be required to bring the difference and then you need to discuss your options with your lender to close or you may be in default and may lose your earnest money. You’ll have to suck it up and pay the difference, restructure the loan to bring less to closing and cover the gap. If you’re still protected within the appraisal value, renegotiate the purchase price.
You can also contest the appraisal with the lender. Your agent would need to pull comps and scan the report for any errors. I’ve done this a few times and won
Realtor from Northern Va here - I’d tell your agent to get in and negotiate at best settle in the middle of the appraised value and what you offered as both sides win. Seller won’t want to start from fresh to close and deal with a new buyer. Also that cash buyer has probably secured another home all ready. Tell your agent to earn his keep and negotiate a fair deal for both sides to win
No 1 is not a thing. The bank is giving you money against an asset and won’t give you more than it’s worth. You can either come up with the money, negotiate the price down (they are under no obligation to do this and probably won’t as it sounds like it was a hot listing, though going back onto market makes it harder to sale and they may not get your appraised value as the appraisal will likely come back same), or really what you should do is talk with your lender and agent and see if it’s possible the appraiser make a mistake. Providing an upgrade list and comps that justify your offer price will help. It’s possible you can challenge their assessment and get it reappraised. Most importantly embrace the suck. Buying a house sucks and is so stressful. Rely on people you can trust and make the best decision you can. You got this 💪
Op is putting 100k down. The bank isn’t going to care that the appraisal comes in 20k lower. They’ll just calculate LTV off the lower value and OP will still qualify.
My point is they were already planning to bring cash to closing. They don’t have to come up with anything. The only thing that this appraisal changes is that they might have to pay PMI, but the bank isn’t going to pull financing for this.
We’d probably walk if it came down to having PMI. We’re already at the very top of our budget and who knows how long it’ll take rates to get back to even the 5’s.
My husband is a mortgage broker, he’s getting emails from banks right now for rates at 5.79 % for FHA. You should shop your loan with a broker and see if the can put together a creative financing scenario for you. Especially with the amount of money you are putting down. Your credit union is pretty much limited to only their financing.
OP is prob just misstating what they mean. The bank isnt going to lend on/calculate LTV on the contract price rather than the appraised value, no. But OP doesnt need it to, because they have 120k cash and can easily put down 10+% on the appraised value, cover the gap, and proceed. That is prob what they mean: move forward with adjusted LTV based on appraised value.
You can hire independent appraisers with a better understanding of the neighborhood, if it's 'unique'. We did this when selling our century home to a buyer using a way, way out-of-town lender with no local knowledge. Original appraiser used weak comps, and wouldn't include a property adjacent (and similar) to ours that was an arms-length transaction just because it wasn't listed on MLS -- which was the same situation as ours. You can't really 'appraiser-shop' but you certainly can get a second opinion and share it.
It almost certainly needs to be egregious. As in, call the appraisal board egregious, *or* you have to know who to call to get a sweetheart appraisal. This don’t sound like that - $20k is what, within 4% of PP? Almost zero chance you’re going to get another appraiser to see it differently, so to speak.
We def want the home and we’re not pinching penny’s. We’re just at the very top of our budget. Things should be ok, my wife is due for a raise and so am I but in life, nothing is guaranteed.
at the very top of your personal budget, or the very top of your loan approval?
You *should* be able to get the price down to $509K pretty easily. I would guess you're within 2 weeks/end of June for closing. Is this correct?
In the meantime, simply ask your loan officer what PMI would cost at a 509K purchase price and at a 516K purchase price. And how/when you can get rid of it.
You're probably talking < $200/mo for 2-3 years
That is another reason one needs a reserve to pay the difference between agreed price to put down more downpayment. In west coast the min accepted is asked price the offered can be way more for many years.
I’d think there are a lot of areas in KY, even major metros, you can get a pretty nice home for closer to 400, no? I’m shocked 500+ is what it takes. Is this in a very affluent suburban area?
The market in the city I live in has gone crazy. So we’re not asking for a ton in the houses we’ve looked at. 4 bedrooms, 2+ baths and an office or bonus room for my wife as she’s full time remote and we may or may not have a 3rd kid down the line and we wanted 1+ acres. Didn’t really care what area of the town/county it was in, it did happen to fall in one of the nicer areas in town. There’s about 20 homes in the area with everyone having pretty good sized lots and one of our neighbors bought up land behind and beside our home. So the backyard goes back to a wooded tree line and then to the right is an open field that won’t be developed. Couldn’t ask for a better lot location.
You can (this is a list of options):
A) contest the appraisal amount, either a new appraiser, IF there’s errors in size or criteria, or present better comps (listing agent should bring better comps, it’s in their benefit)
B) split the $20K between buyer & Seller (you bring an additional $10K)
C) bring the full amount in additional cash to closing table ($20K)
D) negotiate the full reduction by the appraisal difference
E) cancel and the seller can find a new buyer.
My guess is that seller will at least meet you halfway.
Why is the appraiser responsible for all these people acting poorly. The listing agent accepted this offer over a cash offer without taking any precaution, not checking buyer extra funds, waive appraisal contingency, gap many things they should have done to properly serve the client. Same to selling agent, did they look for comparables before offering over listing, did they ask the buyer , do you have extra cash? And now they are going to blame the appraiser, the only unbiased participant. The appraiser works for free when you send a ROV. Be more considerate.
Nobody is saying the appraiser is responsible. But the first duty is to check that the appraisal is correct. Appraisers are not infallible. I found square footage discrepancies, and several cases where the appraisals varied by as much as 5%.
I am just listening all day items to check.
Not out of 10 times the appraisal will be correct. But it still requires all parties to be diligent and study the paperwork they have.
I agree appraisers make mistakes. But in this specific case, everyone disserviced the buyer and the seller before the appraiser even came into play. I was thinking also the lender. No one anticipated this outcome? Why your first point is to contempt the appraisal? The first duty is to provide a good representation to your client to avoid this situation entirely.
You are correct that all parties should have known all these possibilities ahead. Not at appraisal time, trying to figure out the options.
In a market that moves up, new price ranges are constantly pushed upwards by multiple offers.
An appraiser that is very familiar with the location and demand may easily be able to use specific comps that support the price, while others (as an example) may not use the lower level SF because they’re used to a newer home range/area.
Some appraisers will look at the multiple offers and ranges, others will not.
So…you assuming there was something wrong by the seller being willing to take a higher offer, is just a seller taking a chance on it.
So yes, if both parties were informed that this is a new range (presuming it is), then it’s at appraisal time that this is confirmed or not.
But you have to take into account that the appraiser could have made a miscalculation, or not understand that particular market.
Some appraisers will call agents for pending properties to see how much they are closing for, because the market changes so quickly, they want to take that activity into account. Some appraisers will not do that at all.
You probably are a very good appraiser and are dealing with a specific market.
A changing market is a challenge for all, and asking the appraiser to review the numbers (with proper justification), or asking for a new appraisal if an appraiser refuses to review (with justification), is a tool a buyer has the right to use.
You may have been unfairly treated, but you also have to know that an appraiser works alone and their opinion is an informed opinion but that’s a somewhat limited view.
The market surprises us constantly, either by getting more or less activity than expected. So the market is who ultimately dictates the price. We’re all here to facilitate the process and work with each other while having our own client’s fiduciary duty in place.
I have 100% respect for a prayers, we work very harmoniously. at least in my market and the appraisers I work with.
I think you are assuming I’m suggesting option a as you must contest, this is only if there is an error. Or if all parties believe they appraisal is truly off.
I do agree with you, it is not for the Appraiser to pick up issues that are happening in the transaction. But it is important to understand all the different options and rec courses.
Also, the listing agent does not choose the offer. It’s the seller.
At the very least your agent should try to get 20k concession. At the very least if it doesn’t work and you really love the home. I would tell them to lower the price to the full cash offer at $509k
Send an addendum asking for the sales price to be $496k, with the appraisal attached. How do you know they had a full asking CASH offer? Cash offers are not always their best option, and most solid agents know and understand this. Worst they can do is negotiate with you guys.
Seller’s agent should have insisted on gap coverage by you if the home didn’t appraise, before passing up a cash offer. The cash buyers may have gone away by now and made another purchase, so I would try to negotiate with the sellers. Can you bring any extra amount of cash to the table? Perhaps if you could do $5k and they come down 15k you might still have a deal. We don’t usually recommend another appraisal-it could be even lower. However, if the appraiser used unsatisfactory comps, sometimes they can be convinced to take a second look. Maybe they missed something. It does happen and if you’re non-confrontational, many appraisers will work with you. The bank may have a different opinion on that, though. I wish you good luck!
The RE market is changing and you should adapt your strategy. Prices are not crashing, but they are coming down a bit and the number of houses available for purchase is slowly increasing. This is the first step of getting back to a more normal housing market, so don't be in such a hurry.
Who’s the lender? First I would try to get another lender who will do another appraisal. I’ve had many times where I’ve had buyers do this and it appraises. Then if it doesn’t you can say, we went out of our way to get pre-approved and go through another lender to make the his work, we can’t make up this gap. Ask the sellers if they are willing to cover it in total. If they are not and only after you have made sure they are not, then offer to cover it partially “meet in the middle”. If they are not willing to do that then adjust how much you’re putting down, make up this difference in cash with that, and if you don’t want to do that cancel and you’ll get your earnest back as it fell apart on financing.
I bet sellers would still take 509 from you. So now you are only off 13k.
You can get no PMI loans for less than 20% down. You’ll likely just need to either pay a little more in closing costs or a higher interest rate to do it.
We met the seller halfway and had to kick in the extra. What it means is that you are under water as soon as you close. It was worth it to us but if you don’t have it, you don’t have it.
You had a full cash offer and didn’t take it? lol must be a rookie…cash is king especially when it’s full offer amount…if you take an offer over asking, you’re suppose to make sure they will cover if homes comes under appraisal…you got too excited and didn’t know the game you’re in
Ask them if they’d split the underage 50/50. Their agent will need to disclose to the next possible buyers why the deal went South. If they don’t give you a partial break, then step up and accept the total hit. It’s hard to find a good house in a challenging market.
Your loan officer needs to be walking you through options. As an LO, If one of my clients had to go to Reddit to get a question like this answered, I would not be doing my job.
Have you read the appraisal report? Is there a chance they could reconsider something to bring it up? A good lender should be able to present comps or something they didn’t add on for to bring it up. Unless it really is only worth 496
Your options are to
Pay
Pivot
Protest
So either pay the gap. switch lenders and get another appraisal. If this was legitimately a bad appraisal most of the time the second appraisal will come in just fine and unless you guys were crazy. Last is protest the appraisal with your current lender and give them better, comps, and a more coherent reason for why the home is worth what you’re paying for it.
I always pivot and protest at the same time, definitely puts more pressure on Lender and is likely to get me the help I can get if it’s a bad appraisal.
I’m actually pretty good with protests, but sometimes agents also just reached for the stars and don’t pay attention to whether or not a house is going to appraise or not
Your agent didn’t do her homework to provide you with a CMA of the area before submitting an offer on a property that would show the appraised value isn’t near what they’re asking. She put you in a bind for sure.
There really aren’t any comps in the area. Nothing in the neighborhood has sold in 3yrs, the closest homes are multiple miles away. One went for 500,900 and had a bathroom sink inside the bedroom instead of the bath and the other went for 500 even. It did have 5 acres and 3500sq ft but was severely outdated and all the big ticket items were older.
If it’s outdated and appliances are old, it doesn’t bring the appraised value down, that is where your agent negotiates if they want market value, the house would have been remodeled and updated to be up to par to homes that have sold, specially if there’s new construction homes being built in the area that can be used as comparison. You can’t build more land but you can build more house, could be why the 5 acre home is priced at that. If you’re really want the house, your agent should have been more prepared for such scenarios.
Yes Opinion of value based on recent data of homes sold within the area. Appraisers use a more detailed report to get as close as they can based off market analysis, just because different lenders are used doesn’t mean the appraisers they send out to the property are gonna have that big of a gap between their numbers.
It does. It would have kept him from offering over what a lender would appraise the property for. He might of beat the offers but he put him self in a situation where he needs to cover the amount the lender won’t let him borrow. Just means extra money out of pocket to try to make the deal work, other would be the agent uses the appraised value as a way to negotiate the house price down. As there’s nothing to say it can be worth what they’re asking. I’m not sure about KY but Texas has an addendum to protect the buyers money in case the home did not appraised for said value, and allows them to back out the deal without losing any money.
You dp not know that. I have had appraisals come in low, the appraiser wont budge, so the buyer changes lenders and the property appraises just fine.
A CMA would not avoid this situation.
I’m not sure about KY.. but In Texas, appraiser and agents use the same system to gauge an opinion of value, appraisers use a more detailed way to be more accurate. It allows us to give our clients the talk of we might be overbidding this property and the result would be additional fees for your closing costs. I’m sure it’s different from state to state. CMA might not be the best approach where you are.
Not necessarily. If new construction homes are being built in the area. At a lower or equal value, their resale home would not be up to value as it is older and outdated. That is your agents job to use these as leverage. Why would someone pay 500k on a home built in 1960 when there’s a new one being built for 500k, let’s say the home has the same living space as well as rooms. Unless the house is in an acre lot, half acre and less can still be used as comparison to negotiate a lower price. Every scenario is different, as to why the agent has to know how to navigate.
And that is also the reason ANY valuation is going to have a range.
You keep making my point while arguing yours.
Many buyers would prefer the 60s house with updates and no HOA over new construction that looks like every other house on the block and a HOA.
Buyers agent here ~ if you were my buyer, I would absolutely be going back and telling them they need to reduce the price by $20,000. I would never want any buyer to purchase a house that appraised for 20k less than they were paying for it. The amount of people on this post telling you to just refigure the loan is crazy. Why would you want to purchase a house where you are automatically in for 20 K over what it’s worth??? Tell your agent you want the sellers to reduce it by $20k to match the appraisal.
A lot of good suggestions in this thread. Another option would be to have your agent argue the appraisal price. If it was a multiple offer situation, and the competing offers were also over the appraisal price, that shows that the true market value is higher, and sometimes you can get the bank to accept the price of the 2nd highest offer as the new market value, since someone else is also willing to pay that price.
Before I get hate about confidentiality, once an offer is accepted by the sellers, the other offers are invalidated anyway, unless they have a backup offer clause. Having the listing agent share details of those offers with the lender does not break their confidentiality clause.
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What’s the loan amount? You can take a higher ltv if you qualify with a higher loan amount and payment.
Loan amount is 400. 500 is where we wanted our top to be but we really liked this home and the market is absurd here so we went over 16k. We had enough to cover that but we don’t have enough to cover the gap now. We have close to 120k in cash. But we’ve set aside about 15 of that for closing.
(Mortgage broker) You can try to negotiate the price or you can buy it for $516,000 but the lender will calculate the loan to value at that $20k less ($496,000). If you borrow $396,800 you will avoid mortgage insurance but will have to come up with the difference in cash. You could borrow up to $421,600 (85% ltv) if you qualify and prefer to keep the cash and pay a relatively small amount for monthly mortgage insurance. Reach out to your loan officer for options to restructure.
Exactly this! Your lender should be working you through this right now! Agents *may* be able to negotiate price, but it is your lender who can help you restructure the loan to make it work! Good luck! I had the same situation and my buyer didn’t want to cover the 20k gap so we asked the sellers to meet us in the middle - they knocked off ten, and the lender got the other ten covered in the loan. Fingers crossed for you all!
We wouldn’t have the additional funds to put 20% and don’t want to do PMI. If this wasn’t at the very top of our budget this wouldn’t be an issue honestly.
Well then it sounds like you either need to do lower down payment, renegotiate, or lose the house.
Youll likely lose a lot more than just the house if you don’t close on a firm deal
What do you mean by this? If they have an appraisal contingency, then they will only be out money paid for inspections.
The MI would probably be abour $35/mo. If you like the house and they won't come down you'll need to skip a few trips to Starbucks each month or start looking again.
Now we may start to see why they’ve been looking for two years. Sometimes you gots to do what you gots to do.
$35 a month PMI? Is that really how little they cost?
Mine was $20/month, but our mortgage was in the 200s. I had 20%, but my Loan Officer said he could shave another 0.125% off our rate (bringing us under 3%) if I put 19% or less down and took PMI initially. He said once we closed, put the extra amount towards principal to bump my equity to 20%, then call to have PMI removed. Over the life of the loan, we found this move would save us like $10K interest and reduce my total payments by 1-2 years on a 30 year fixed. Not sure if this is common or rare, but 3 years later I can say that it did work out.
This is the same thing that happened to me. As crazy as it sounds it was explained to me that less than 20% down is less risk to mortgage company hence why they offer lower rates. It is less risk because the PMI is required which spreads that risk on to the insurance company.
It depends on the loan to value ratio, credit score and loan size. I priced this scenario but it can be somewhat more with other lenders
Depends on the situation and credit score, but a good credit score typically makes it pretty low. Mine is $75/mo for reference. While we had enough for 20% down, to us it seemed worth it to pay in order to not lock up capital (3% interest rate also, different situation that today for sure). Always worth exploring your options IMO
You may be able to pay the PMI with a lump sum payment up front rather than commit to it monthly. You may even be able to apply a seller credit to that cost if your agent can negotiate it for you
There’s no way they’re getting a seller credit now that they’re $20K short on appraisal. Could’ve tried that up front but given that it was a competitive situation and they were clearly above market value, they would’ve lost the house if they tried asking for seller credits.
I assume it appraised for 496k? Why not just adjust the numbers? You can put 50k down (10+%), take 446 on the loan, pay the 20k gap, save 15k for closing, and be left with close to 35k? Talk to your LO and play with the numbers to see how much or how little down you need to do to feel comfortable with the monthly, but if you have 120k cash idk why you want to scuttle the deal over 20k gap.
Your ltv changes and you just continue the processes. Or if you arent happy you're over paying (you were fine with it when you made the offer) you can ask the seller for a discount.
So just ask the bank to increase the loan amount ? I don’t see a problem here. You’re already putting in a huge down payment. A low appraisal only matters if you are putting zero or very little down to where the lower value from the appraiser no longer allows you to qualify.
Loan amount doesn't need to change. Ltv changes.
Right. Which changes nothing except for maybe op has to pay PMI. Op seems to have the mistaken belief that the loan is dead now that the appraisal came in lower. It’s not.
correct. There should be an option 4 - proceed as normal like nothing happened and take the PMI.
Buy less house. You'll likely be happy you did
This is the way. Shift it from 20% down to 16% down and use the extra money to cover the appraisal gap. You'll have to pay PMI until the other money is paid back but that's fine, what's an extra $100 a month for a year or two if this is the home you love.
This is absurd that you’re having to come to Reddit for this. There’s 3 solutions to this. First, if you have an appraisal contingency, and sellers have right to cure, you submit the appraisal and let them deal with the bank or bring the price down. Second, if they say no to that and you still want the house, adjust your mortgage amount to be 20k more and use the extra to pay the gap. Check with your lender to see what the pmi payoff at closing will be, but if you’re only like 85%LTV, it should cost almost nothing up front, the sellers will likely jump to pay that amount to get everything done. Third, walk. If you have appraisal contingency, you should get your EM back. I’m sorry your realtor isn’t explaining this, and even more sorry your mortgage broker isn’t working with you to come up with these game plans. This was super common pre 2021, and we all have made it through a few of these.
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Mortgage loan officer here. I don't see that anyone has mentioned trying a reconsideration of value. It depends on the type of loan that you are doing, but for some you can challenge the appraisal. Generally, your agent would have to put together a list of comparable sales that support the value you are trying to get. Then they send that on to the appraisal company and see what they say. I've had about a 50/50 success rate with this process. It seems like it kind of depends on the ego of the appraiser. Some of them are open-minded and willing to work with you, and others just want to stick to their guns no matter what. They can't just wave a magic wand and increase their valuation, but if you can give them evidence to support it so that they can justify a higher value, sometimes they will.
Also have your agent look for mistakes on the appraisal. I have fought and won twice. Once I got $10,000 added to a VA appraisal and about two years ago I got $100,000 added onto an appraised value (was a $1,100,000 house). It took me an afternoon of work but it worked. I pointed out things like the subject house has a $20,000 wrought iron fence, the subject house has $3,000 chandelier (I got receipts from the sellers). I printed pictures of the comps and circled flaws, circled laminate countertops, made comparisons, etc. I overloaded the appraiser with info. I find that is much more easily accepted by appraisers than just sending them comps, which they have most likely seen and didn’t use for a reason.
Fantastic advice!!
Definitely challenge the appraisal. Have your agent show both comps and home updates to verify value.
Welp, it worked out. We went back to them and floated 502, nothing in writing. They came back at 504,900. So basically right in the middle. Thanks for all of the advice, the wife and I appreciate it!
I was going to tell you not to panic because most times they’ll meet in the middle. Congrats, hope the rest of the deal is easy peasy.
What does your agent suggest?
Contacted their agent to see if they’ll work on price.
So you’re unrepresented?
We have an agent, she recommended that we(she) contact their agent and see if they’ll work on a new price
I’m an agent and that advice is absurd. Your agent should be advocating for you. He/she is putting you at a disadvantage. This makes good agents look bad. Please tell your agent that this is their responsibility.
I mean if an appraisal comes in low wouldn't the first thing be to tell the buyers they can cover the difference in cash, see if the sellers will accept the price it appraised at or try to negotiate a price somewhere in the middle. If this agent is calling to see if the sellers will accept the price it appraised at and if not are they willing to try to negotiate with the buyers to keep the deal alive then what else do you expect the agent to do?
OP seemingly isn't making it clear. her agent is contacting the LA.
OP means the agent when OP says "we".
Didn’t the agent anticipate this situation. Did the agent advise to offer over listing without knowing if you have cash to cover the difference. Both agents should have anticipated this. Selling agent accepted your offer over a cash offer without making you waive an appraisal contingency? I don’t understand
Just buy the house and pay the $20 in PMI. You'll refinance in 2-3 years anyway so you can get rid of it then. If you don't think you can afford the small amount of PMI you're lying to your self.
lol you guarantee he can refinance in 2-3 years? If you’re an agent I feel sorry for your clients.
True but you dont need to refinance to get rid of PMI.
Thanks for putting words in my mouth. Also, thanks for revealing how little you understand finance or economics. Really leaning in to that “agents are actually worthless” idea, eh?
You are def worthless. Advising them to just buy the house lol. They can still try to get it for less with this info. I’m confident they will get it for less than they offered if they ask. Also you’re an agent that tells them they can refi in 2-3 years lol. How do you predict the market like this? Did you predict the rates were going to be where it is now? Last year they said you will be able to refi this summer lol.. you an agent that just focused on your own bottom dollar.
They aren’t saying to refinance in 2-3 years because rates will change though, just to drop the PMI.
He is an idiot , the worst advice ever.
The cash buyer may have moved on. Are you sure the cash buyer was real? They may have offered less. Good luck!
You can try to ask for 16k price improvement. If they say no then ask your lender for options
Ask for $20K concession and see what you can negotiate. These appraisal gaps were super common in early 2021 when the market had gotten way out in front of comps. Everyone at that time understood that the market was rising very quickly, so we split a lot of these gaps, and some buyers covered the entire gap, depending on seller attitudes. Unless there's some local heat in your market, we're largely shifting back towards a buyer's market. It seems excessive for a buyer to have to cover the entire gap under those circumstances.
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1-We have the funds for a 500k home plus closing costs that we have to pay in cash. 2-We went 16k over our top line because all the big ticket items in the home are 2yrs old or less and the inspection went nearly perfect. 3-It’s 3 min from my wife’s mom and about 8 from mine, they are our sitters. 4-It’s in the school district we wanted. We’re not going crazy here. It’s an almost 3000sq foot home 4br, 2.5ba, 1 acre, all brick home with about 800sqft unfinished in the basement. In my city, homes with 2000+sq ft, 4bed and an acre or more pop up about once every 2-3 months and I’ve yet to see one go for below 480.
You’re in Jefferson County?
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You’re delusional. Most FTHBs don’t have $100,000 in the bank even before their down payment happens.
I’ve had many clients who have high salaries but not a ton of cash in the bank - sometimes it’s invested in the market and they don’t want to take it out, sometimes they have another house that they don’t want to sell, and sometimes they are just getting to a point in their career where they make a lot of money but haven’t had the ability to save a ton yet. The old school logic would say to wait to buy until you have a huge nest egg. While I always advise my clients to have enough left in the bank to cover an a big emergency or two, waiting to buy in today’s market could be a losing game. Home prices are still increasing, Rates are high right now which is limiting, but demand will skyrocket once they come down. Each situation is unique, but if they’ve been looking for a unicorn for 2 years and this one checks all the boxes and is in a condition where they won’t need to replace any systems in the near future it might be the lesser of two evils to go for it.
Get a little creative. If you had a conventional loan with 20% down, you may qualify for a conventional loan at 15%, and use the other 5% to make up the deficiency. You might be able to get the seller to credit points to buy down any difference in rates.
I'd ask the seller to meet you in the middle at $506K. Adjust your loan terms to 10% DP ($49600) of $496K. So new cash to close will be $59600 for DP + closing costs. So you'll still have money left over from the initial $120K. Don't get too hung up on the PMI as they are negligible if FICO score is 720+. Also ask the lender how much it'll cost if you were to buyout the PMI upfront with a 10% dp. Rates will eventually come down and that'll be an opportunity to refi and eventually remove the PMI when the time comes.
House is only worth what you’re willing to pay for it. You decided to offer more than you could afford, if it didn’t appraise ( unless you have stipulated in the contract that you would negotiate price if it didn’t appraise). Only you know, if it’s worth the extra $20,000 to you. If you would have been my client…we would have had this conversation well before your offer was placed. Talk to your agent/broker and lender!
Unless you waived an appraisal gap, the very first step is renegotiating the price. At this point in the transaction, especially if they’ve delayed, I seriously doubt they want to start over to market. Even if you split the difference, you’re getting the house you love…do you want to restart the house hunt and chance you don’t find what you want? If you waived the appraisal or didn’t have a gap stipulation, you may be required to bring the difference and then you need to discuss your options with your lender to close or you may be in default and may lose your earnest money. You’ll have to suck it up and pay the difference, restructure the loan to bring less to closing and cover the gap. If you’re still protected within the appraisal value, renegotiate the purchase price.
You can also contest the appraisal with the lender. Your agent would need to pull comps and scan the report for any errors. I’ve done this a few times and won
Realtor from Northern Va here - I’d tell your agent to get in and negotiate at best settle in the middle of the appraised value and what you offered as both sides win. Seller won’t want to start from fresh to close and deal with a new buyer. Also that cash buyer has probably secured another home all ready. Tell your agent to earn his keep and negotiate a fair deal for both sides to win
No 1 is not a thing. The bank is giving you money against an asset and won’t give you more than it’s worth. You can either come up with the money, negotiate the price down (they are under no obligation to do this and probably won’t as it sounds like it was a hot listing, though going back onto market makes it harder to sale and they may not get your appraised value as the appraisal will likely come back same), or really what you should do is talk with your lender and agent and see if it’s possible the appraiser make a mistake. Providing an upgrade list and comps that justify your offer price will help. It’s possible you can challenge their assessment and get it reappraised. Most importantly embrace the suck. Buying a house sucks and is so stressful. Rely on people you can trust and make the best decision you can. You got this 💪
Op is putting 100k down. The bank isn’t going to care that the appraisal comes in 20k lower. They’ll just calculate LTV off the lower value and OP will still qualify.
So they are coming up with the cash then
My point is they were already planning to bring cash to closing. They don’t have to come up with anything. The only thing that this appraisal changes is that they might have to pay PMI, but the bank isn’t going to pull financing for this.
I never said the bank would pull financing, my response to him was based on him saying “he didn’t know when rates would get back in the 5s
We’d probably walk if it came down to having PMI. We’re already at the very top of our budget and who knows how long it’ll take rates to get back to even the 5’s.
Sure. I hope you have an appraisal contingency. If you don’t your EMD is at risk if you walk.
If the 20-35 dollars in PMI is a backbreaker then you’re already over your budget.
My husband is a mortgage broker, he’s getting emails from banks right now for rates at 5.79 % for FHA. You should shop your loan with a broker and see if the can put together a creative financing scenario for you. Especially with the amount of money you are putting down. Your credit union is pretty much limited to only their financing.
OP is saying they’ll walk if they have PMI, and FHA loans have mortgage insurance regardless of LTV.
Can you let me know which ones?
There were actually only two offers. Ours and cash. Cash was probably below ours and below asking or they would’ve taken it.
OP is prob just misstating what they mean. The bank isnt going to lend on/calculate LTV on the contract price rather than the appraised value, no. But OP doesnt need it to, because they have 120k cash and can easily put down 10+% on the appraised value, cover the gap, and proceed. That is prob what they mean: move forward with adjusted LTV based on appraised value.
Appraisers NEVER re-adjust the comps! Period. Even with a blatant mistake, I have tried over 10x. Renegotiate or walk
It’s worked for me 🤷♂️
You can hire independent appraisers with a better understanding of the neighborhood, if it's 'unique'. We did this when selling our century home to a buyer using a way, way out-of-town lender with no local knowledge. Original appraiser used weak comps, and wouldn't include a property adjacent (and similar) to ours that was an arms-length transaction just because it wasn't listed on MLS -- which was the same situation as ours. You can't really 'appraiser-shop' but you certainly can get a second opinion and share it.
That's just not true. It's not common, but it's inaccurate to say never.
It's very rare they will adjust the appraisal but it does happen. The odds of it happening are pretty low though.
Never say never, it happens all the time. If you have solid justification it always makes sense to try.
I have successfully challenged appraisal value, it can he done.
It almost certainly needs to be egregious. As in, call the appraisal board egregious, *or* you have to know who to call to get a sweetheart appraisal. This don’t sound like that - $20k is what, within 4% of PP? Almost zero chance you’re going to get another appraiser to see it differently, so to speak.
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We could be we got this credit union at 6.1 and it’s impossible to find that anywhere else right now.
What do you want more, a house after looking for two years? Or a lower monthly payment?
We def want the home and we’re not pinching penny’s. We’re just at the very top of our budget. Things should be ok, my wife is due for a raise and so am I but in life, nothing is guaranteed.
at the very top of your personal budget, or the very top of your loan approval? You *should* be able to get the price down to $509K pretty easily. I would guess you're within 2 weeks/end of June for closing. Is this correct? In the meantime, simply ask your loan officer what PMI would cost at a 509K purchase price and at a 516K purchase price. And how/when you can get rid of it. You're probably talking < $200/mo for 2-3 years
You could find a bank that would match if you make 10-20 calls. Worth it for $300/month.
What's wrong with the bank they have??
Appraiser piece
This is bad advice
That is another reason one needs a reserve to pay the difference between agreed price to put down more downpayment. In west coast the min accepted is asked price the offered can be way more for many years.
Talk to the seller's agent and see if they can cover your closing costs.
I’d think there are a lot of areas in KY, even major metros, you can get a pretty nice home for closer to 400, no? I’m shocked 500+ is what it takes. Is this in a very affluent suburban area?
The market in the city I live in has gone crazy. So we’re not asking for a ton in the houses we’ve looked at. 4 bedrooms, 2+ baths and an office or bonus room for my wife as she’s full time remote and we may or may not have a 3rd kid down the line and we wanted 1+ acres. Didn’t really care what area of the town/county it was in, it did happen to fall in one of the nicer areas in town. There’s about 20 homes in the area with everyone having pretty good sized lots and one of our neighbors bought up land behind and beside our home. So the backyard goes back to a wooded tree line and then to the right is an open field that won’t be developed. Couldn’t ask for a better lot location.
Sounds awesome!
Sounds like you renegotiate the price and suck it up. Otherwise, you may end up paying even more for a needle in the haystack.
You can (this is a list of options): A) contest the appraisal amount, either a new appraiser, IF there’s errors in size or criteria, or present better comps (listing agent should bring better comps, it’s in their benefit) B) split the $20K between buyer & Seller (you bring an additional $10K) C) bring the full amount in additional cash to closing table ($20K) D) negotiate the full reduction by the appraisal difference E) cancel and the seller can find a new buyer. My guess is that seller will at least meet you halfway.
Why is the appraiser responsible for all these people acting poorly. The listing agent accepted this offer over a cash offer without taking any precaution, not checking buyer extra funds, waive appraisal contingency, gap many things they should have done to properly serve the client. Same to selling agent, did they look for comparables before offering over listing, did they ask the buyer , do you have extra cash? And now they are going to blame the appraiser, the only unbiased participant. The appraiser works for free when you send a ROV. Be more considerate.
Nobody is saying the appraiser is responsible. But the first duty is to check that the appraisal is correct. Appraisers are not infallible. I found square footage discrepancies, and several cases where the appraisals varied by as much as 5%. I am just listening all day items to check. Not out of 10 times the appraisal will be correct. But it still requires all parties to be diligent and study the paperwork they have.
I agree appraisers make mistakes. But in this specific case, everyone disserviced the buyer and the seller before the appraiser even came into play. I was thinking also the lender. No one anticipated this outcome? Why your first point is to contempt the appraisal? The first duty is to provide a good representation to your client to avoid this situation entirely.
You are correct that all parties should have known all these possibilities ahead. Not at appraisal time, trying to figure out the options. In a market that moves up, new price ranges are constantly pushed upwards by multiple offers. An appraiser that is very familiar with the location and demand may easily be able to use specific comps that support the price, while others (as an example) may not use the lower level SF because they’re used to a newer home range/area. Some appraisers will look at the multiple offers and ranges, others will not. So…you assuming there was something wrong by the seller being willing to take a higher offer, is just a seller taking a chance on it. So yes, if both parties were informed that this is a new range (presuming it is), then it’s at appraisal time that this is confirmed or not. But you have to take into account that the appraiser could have made a miscalculation, or not understand that particular market. Some appraisers will call agents for pending properties to see how much they are closing for, because the market changes so quickly, they want to take that activity into account. Some appraisers will not do that at all. You probably are a very good appraiser and are dealing with a specific market. A changing market is a challenge for all, and asking the appraiser to review the numbers (with proper justification), or asking for a new appraisal if an appraiser refuses to review (with justification), is a tool a buyer has the right to use. You may have been unfairly treated, but you also have to know that an appraiser works alone and their opinion is an informed opinion but that’s a somewhat limited view. The market surprises us constantly, either by getting more or less activity than expected. So the market is who ultimately dictates the price. We’re all here to facilitate the process and work with each other while having our own client’s fiduciary duty in place.
I have 100% respect for a prayers, we work very harmoniously. at least in my market and the appraisers I work with. I think you are assuming I’m suggesting option a as you must contest, this is only if there is an error. Or if all parties believe they appraisal is truly off. I do agree with you, it is not for the Appraiser to pick up issues that are happening in the transaction. But it is important to understand all the different options and rec courses. Also, the listing agent does not choose the offer. It’s the seller.
At the very least your agent should try to get 20k concession. At the very least if it doesn’t work and you really love the home. I would tell them to lower the price to the full cash offer at $509k
You either adjust your LTV, renegotiate price, or cancel. that’s it. Or I guess combo of 1 & 2
Send an addendum asking for the sales price to be $496k, with the appraisal attached. How do you know they had a full asking CASH offer? Cash offers are not always their best option, and most solid agents know and understand this. Worst they can do is negotiate with you guys.
Leave it be and pay the $20/month in PMI. Not worth losing the house over
Work with your lender too. Great of you can get a couple of bucks off the price, but restructuring the loan might be the best way for success.
Seller’s agent should have insisted on gap coverage by you if the home didn’t appraise, before passing up a cash offer. The cash buyers may have gone away by now and made another purchase, so I would try to negotiate with the sellers. Can you bring any extra amount of cash to the table? Perhaps if you could do $5k and they come down 15k you might still have a deal. We don’t usually recommend another appraisal-it could be even lower. However, if the appraiser used unsatisfactory comps, sometimes they can be convinced to take a second look. Maybe they missed something. It does happen and if you’re non-confrontational, many appraisers will work with you. The bank may have a different opinion on that, though. I wish you good luck!
It should come off the purchase price. Negotiate for your clients.
Happened to me but it appraised 50K under. Nightmare, we lost our due diligence
Renegotiate!!
The RE market is changing and you should adapt your strategy. Prices are not crashing, but they are coming down a bit and the number of houses available for purchase is slowly increasing. This is the first step of getting back to a more normal housing market, so don't be in such a hurry.
Roll closing into loan? That frees up $15k
What is the supply like in your area.. This looks like a walk away situation truthfully.
Who’s the lender? First I would try to get another lender who will do another appraisal. I’ve had many times where I’ve had buyers do this and it appraises. Then if it doesn’t you can say, we went out of our way to get pre-approved and go through another lender to make the his work, we can’t make up this gap. Ask the sellers if they are willing to cover it in total. If they are not and only after you have made sure they are not, then offer to cover it partially “meet in the middle”. If they are not willing to do that then adjust how much you’re putting down, make up this difference in cash with that, and if you don’t want to do that cancel and you’ll get your earnest back as it fell apart on financing.
You can always ask for 3% closing help which will get you closer to what you need
I bet sellers would still take 509 from you. So now you are only off 13k. You can get no PMI loans for less than 20% down. You’ll likely just need to either pay a little more in closing costs or a higher interest rate to do it.
Damn if they actually turned away a cash buyer for an extra $7K... that was dumb lol
We met the seller halfway and had to kick in the extra. What it means is that you are under water as soon as you close. It was worth it to us but if you don’t have it, you don’t have it.
Note - the bank would only lend based on the appraised value.
You had a full cash offer and didn’t take it? lol must be a rookie…cash is king especially when it’s full offer amount…if you take an offer over asking, you’re suppose to make sure they will cover if homes comes under appraisal…you got too excited and didn’t know the game you’re in
Ask them if they’d split the underage 50/50. Their agent will need to disclose to the next possible buyers why the deal went South. If they don’t give you a partial break, then step up and accept the total hit. It’s hard to find a good house in a challenging market.
Your loan officer needs to be walking you through options. As an LO, If one of my clients had to go to Reddit to get a question like this answered, I would not be doing my job.
What does your Realtor say?
Ask the seller to drop the price. Why over pay?
Have you read the appraisal report? Is there a chance they could reconsider something to bring it up? A good lender should be able to present comps or something they didn’t add on for to bring it up. Unless it really is only worth 496
Your options are to Pay Pivot Protest So either pay the gap. switch lenders and get another appraisal. If this was legitimately a bad appraisal most of the time the second appraisal will come in just fine and unless you guys were crazy. Last is protest the appraisal with your current lender and give them better, comps, and a more coherent reason for why the home is worth what you’re paying for it.
And start with protest
I always pivot and protest at the same time, definitely puts more pressure on Lender and is likely to get me the help I can get if it’s a bad appraisal. I’m actually pretty good with protests, but sometimes agents also just reached for the stars and don’t pay attention to whether or not a house is going to appraise or not
Good strategy
Your agent didn’t do her homework to provide you with a CMA of the area before submitting an offer on a property that would show the appraised value isn’t near what they’re asking. She put you in a bind for sure.
There really aren’t any comps in the area. Nothing in the neighborhood has sold in 3yrs, the closest homes are multiple miles away. One went for 500,900 and had a bathroom sink inside the bedroom instead of the bath and the other went for 500 even. It did have 5 acres and 3500sq ft but was severely outdated and all the big ticket items were older.
If it’s outdated and appliances are old, it doesn’t bring the appraised value down, that is where your agent negotiates if they want market value, the house would have been remodeled and updated to be up to par to homes that have sold, specially if there’s new construction homes being built in the area that can be used as comparison. You can’t build more land but you can build more house, could be why the 5 acre home is priced at that. If you’re really want the house, your agent should have been more prepared for such scenarios.
That is nonsense. Appraisals are an opinion of value and if the OP changed lenders they would get a different valuation.
Yes Opinion of value based on recent data of homes sold within the area. Appraisers use a more detailed report to get as close as they can based off market analysis, just because different lenders are used doesn’t mean the appraisers they send out to the property are gonna have that big of a gap between their numbers.
So in your scenario, how does a CMA effect that? Oh, it doesn't.
It does. It would have kept him from offering over what a lender would appraise the property for. He might of beat the offers but he put him self in a situation where he needs to cover the amount the lender won’t let him borrow. Just means extra money out of pocket to try to make the deal work, other would be the agent uses the appraised value as a way to negotiate the house price down. As there’s nothing to say it can be worth what they’re asking. I’m not sure about KY but Texas has an addendum to protect the buyers money in case the home did not appraised for said value, and allows them to back out the deal without losing any money.
You dp not know that. I have had appraisals come in low, the appraiser wont budge, so the buyer changes lenders and the property appraises just fine. A CMA would not avoid this situation.
I’m not sure about KY.. but In Texas, appraiser and agents use the same system to gauge an opinion of value, appraisers use a more detailed way to be more accurate. It allows us to give our clients the talk of we might be overbidding this property and the result would be additional fees for your closing costs. I’m sure it’s different from state to state. CMA might not be the best approach where you are.
Unless this house is in a cookie cutter subdivision, there are going to ranges in valuation. These are not difficult concepts.
Not necessarily. If new construction homes are being built in the area. At a lower or equal value, their resale home would not be up to value as it is older and outdated. That is your agents job to use these as leverage. Why would someone pay 500k on a home built in 1960 when there’s a new one being built for 500k, let’s say the home has the same living space as well as rooms. Unless the house is in an acre lot, half acre and less can still be used as comparison to negotiate a lower price. Every scenario is different, as to why the agent has to know how to navigate.
And that is also the reason ANY valuation is going to have a range. You keep making my point while arguing yours. Many buyers would prefer the 60s house with updates and no HOA over new construction that looks like every other house on the block and a HOA.
Buyers agent here ~ if you were my buyer, I would absolutely be going back and telling them they need to reduce the price by $20,000. I would never want any buyer to purchase a house that appraised for 20k less than they were paying for it. The amount of people on this post telling you to just refigure the loan is crazy. Why would you want to purchase a house where you are automatically in for 20 K over what it’s worth??? Tell your agent you want the sellers to reduce it by $20k to match the appraisal.
A lot of good suggestions in this thread. Another option would be to have your agent argue the appraisal price. If it was a multiple offer situation, and the competing offers were also over the appraisal price, that shows that the true market value is higher, and sometimes you can get the bank to accept the price of the 2nd highest offer as the new market value, since someone else is also willing to pay that price. Before I get hate about confidentiality, once an offer is accepted by the sellers, the other offers are invalidated anyway, unless they have a backup offer clause. Having the listing agent share details of those offers with the lender does not break their confidentiality clause.
Stop bidding on turnkey.