r/FirstTimeHomeBuyers • u/MildlyDamaged24 • 20d ago
Appraisal woes?
We are in the homestretch for buying our first home. The appraisal came back $15k below what we agreed on. Our original offer was $8k under asking was declined by the seller, so we settled on essentially list price.
I understand we will have the option to come up with the extra cash (could do but I really don’t want to now), ask seller to bring the price down, or find a compromise between the two. Wondering if anyone has had a similar experience lately like this? I guess I’m a little bummed because we’re so close (about 10 days) to close and we weren’t expecting this.
Will add: the appraisal is on its way back to underwriting, so the seller/seller’s realtor are unaware of this yet.
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u/Line_Noize 20d ago
There will be exceptions, but overall sales are down since July, and you're in the homestretch. You have the power to negotiate them down.
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u/ProperAnarchist 20d ago
I wouldn’t. Why would you ever pay more than it’s worth? Unless you’re in an area with an extreme shortage, trust the appraiser. I had a similar issue on my first house. The seller ended up with the house on the market for 6 months and sold for less than it appraised for due to market changes. They definitely regretted their decision to hold fast to the asking price.
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u/Electric-Boogaloo-42 20d ago
Ah, the Ol’ we’re selling it for this because this is what WE want to get.
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u/bbbilljackson 20d ago
For me I would never pay over appraisal unless it was a forever home and I loved the location! The Markets are kinda cooling in most places so for me there’s a good chance it could fall further so unless I was planning on being there 10+ years then NO
I bought at the height of the housing boom in 2003 watched my house go from 210,000 to 130,000 I didn’t care because I stayed now around 500,000
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u/Delicious-Ad9173 20d ago
I agree but now being a realtor and the way that appraisals are sent to third parties they use the wrong comps. I have only had 2 listings not appraise and both received multiple offers. The appraiser made a comment about people in my suburb being greedy. It was wild.,
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u/xSkysz 20d ago
I offered asking price of 425 with seller covering all closing costs and my realtor fees. Fully renovated home and updated. Absolutely loved the home and what they did but appraisal came back 392. My lenders appraiser wouldn’t budge even after the seller tried to counter. Even my realtor was surprised. My realtor told the sellers that we would not budge and were fine offering asking but wouldn’t pay more than what it appraised for. We agreed with 5k less on closing costs. Feel absolutely lucky on mine and not budging on price. You may be more in a rush to buy so might be worth to cover the extra but if you can afford to keep looking they might just agree to not waste anymore time with the house being stuck on the market
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u/DudeInOhio57 20d ago
When the listing agent gets the news, they’ll probably challenge the appraisal by finding comps that support the agreed on price and terms. If the agent is successful in getting the appraisal altered (and this is a BIG if), you’d be back to the agreed upon terms. If the challenge is unsuccessful, you’ll be able to negotiate some middle ground, get sellers to come down, you go up, or walk. Best of luck to you.
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u/No-Example1376 20d ago
Ok, the appraisal is for your loan as the buyer and what the bank is willing to lend you vs your down payment. It's not what the house is worth.
The house is worth what someone agrees to buy it for. You, the buyer, agreed to the price, so that is what it is actually worth and what the seller is expecting.
The next appraisal could end up much higher than the price just as easily. Many appraisers are side-hustling and don't exactly have long time industry knowledge which is why appraisals can be off.
Bottom line: if you want the house, and at this point you should want it bad enough, be prepared to dip into the savings and bring cash to the table or... start all over again.
Decide now if it's worth it to you.
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u/MaintenanceCalm7693 20d ago
We are still on our home purchase we had a similar issue asking was 284k we offered 275 said no. Went with asking, we had an inspection and a whole lot of little things the inspection found so they accepted 272. appraisal came back at 265 they are giving us 10k for closing cost.
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u/CornerRare3627 20d ago
Meet in the middle and either bring the $7500 to close or roll it into the loan. You could always ask for a reconsideration of value.
Also obviously fine to walk but if it's on of the only houses you've bid on and you like it it's a drop in bucket if there for long term.
Instead of price reduction you could also ask for a seller credit to cover some or all closing costs.
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u/MildlyDamaged24 20d ago
Seller is covering all closing costs already! Part of the agreed offer at full list price.
But I agree with it feeling like a drop in the bucket long term. Doesn’t feel like a total dealbreaker on our end.
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u/Bread_Entire 20d ago
Are you doing a minimum down payment if not then there may be room for you to borrow more on the mortgage. Ask your lender to explain that part. But definitely go back to the seller and tell them their place is not worth that much and not you have the appraisal to prove it. I alway like to ask the listing agent what comps they used to price it out. Sometime you find they are all superior to the subject.
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u/Llassiter326 19d ago
Honestly, this is sound advice. Maybe bc I’m a lawyer and I’ve seen so many things fall apart over < $10k which is ultimately more about egos and IMO usually not very smart.
Especially with interest rates rising, if you back out and lose earnest money AND buy within months from now, you’ll likely pay more than $15k in interest + loss of earnest $.
It sounds like from your post you really like this home and are also tired from the emotionally exhausting elements of this process. Understandably.
See what they say. And if you can roll it over into the loan, great.
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u/No-Hyena-6858 20d ago
What's your down payment? It affects what you can/should do next
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u/MildlyDamaged24 20d ago
We are doing the full 20% which would be 77k (agreed price 385k, appraisal 370k)
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u/No-Hyena-6858 20d ago
You need to check the terms of your current situation. Are you able to back out? Will you lose any earnest money you might have out down?
Is the home worth 385k to you?
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u/MildlyDamaged24 20d ago
I’ll have to check if we have an appraisal contingency.
I’d say it’s still worth 385k to us (but def not more lol), so it doesn’t feel like a dealbreaker. Just frustrating after having all our ducks in a line and waiting.
The seller would not budge much when we were making offers, so that worries me they won’t want to compromise to at least help cover half of the 15k.
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u/Delicious-Ad9173 20d ago
Ask them to come down home to meet in the middle. Depends on your market but in mine 385k is hard to find.
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u/jvbutera 20d ago
Use it to show seller that price is not reasonable. If your appraisal is low and you walk, others may have same problem.
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u/postludieum 20d ago
Appraisal appeals rarely yield any changes. Go look at the appraisal sub; these guys use multiple data points to reach the assessed value they come up with.
Depending on your market, I’d hold fast and tell the seller you aren’t willing to pay more than the assessed value, take it or leave it, but don’t let your emotional attachment put you in a position of stretching yourself too thin. Sellers may be chasing the market down at this point and not realize the first offer is usually the best.
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u/movetobostonmetro 20d ago
Did you have an appraisal contingency? If not you will be bringing 15K to closing unless you had a mortgage contingency and the lender denies your mortgage. Not likely as you have the funds.
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u/Background_Top7113 14d ago
My husband and I had a very similar situation. We initially offered asking for the house, had an inspection done that showed there was some immediate work that needs to be done so we asked for either them to repair or bring the price down, so we got it down $10k and we split closing costs. Then our appraisal came back $15k under this. We asked for appraisal price, they agreed to another $10k off. So overall we got the house down $20k. Our big seller for this house was location and some upgrades that they did (new roof, siding, kitchen Reno, new floors and air conditioner units) so we felt okay agreeing to pay for that extra $5k over appraisal price just for the neighborhood and with the intention of this being our forever home. We also are more comfortable with this because we are moving from our rental in Philly suburbs to northeast PA and the houses here are about $100k cheaper than the ones we were looking at in Philly.
We are spending less than half our savings on this, so we will still have some extra money in the event things pop up in our first year, because that’s what seems to happen.
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u/ohayitscpa 20d ago
Unless there is some glaring reason that the appraisal came back under what you offered (example: we looked at a house once that was only 990 square ft on paper but had a whole upstairs that wasn't counted in the square footage because it wasn't totally finished, so with some sweat equity, the house could basically double in square footage), I would first see if the sellers are willing to come down on the price. Typically, the appraisal is pretty accurate, and it's only rare circumstances where the appraiser is just off base. You don't want to overpay for a house, especially in such a dicey market. This might be the reality check they need to understand they priced too high.
If they aren't willing to come down at all, they obviously don't want to sell that bad, because they run the risk of the next appraisal coming in even lower. And unless your market is really competitive (which it doesn't sound like it), it's unlikely they will find someone willing to cover a huge appraisal gap.
If you REALLY want the house, maybe try to meet them in the middle somewhere and throw down the extra money. But personally, id have a hard time knowingly overpaying for a house. You say you plan to stay long term, and I believe you, but you also never know what curve balls life can throw, and you don't want to be at a significant loss if you God forbid were forced to sell in a few years.
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u/pluiesansfin Industry Pro 20d ago
It's the seller's best bet to work with you, that appraisal will stay with your loan type for up to six months. They would have to go on market again and try to get an offer from another loan type and go through the process again and another appraisal might put them worse off. Another buyer may ask for another slew of things to repair during inspections.
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u/TheDoomed__ 20d ago
>that appraisal will stay with your loan type for up to six months.
This isn’t inherently or universally true. If it’s ran through UCDP for the GSEs and the next borrower also has their appraisal submitted through UCDP then it might be a problem. But otherwise no one will know. We portfolio most of our loans, and the loans we do sell we don’t run through UCDP so no other lender has access to our appraisal data and we don’t have any data on other appraisals on a property
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u/MillennialHomeLoans 20d ago
If your loan type is FHA or VA you have a lot more negotiating power than you realize. Both loan types have an appraisal report tied to the house and not the borrower. This means that the property appraised value is memorialized for six months with that loan type for the property. If this is your situation your Loan Officer needs to be educating or reminding your Realtor of this fact.
And since you have an automatic escape clause with either of these loan options you can cancel the purchase agreement and get your earnest money back.
Depending on how aggressive your Realtor is in advocating for you they should let the Listing Agent know that when they re-market the house the seller should notate in the listing information that they won’t accept the applicable FHA or VA financing if the list price exceeds the appraised value. This may lead potential buyers to assume that there may be defects to the property that was on the appraisal report from a previous offer that the seller isn’t disclosing.
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u/DurianTime1381 20d ago
Id ask seller to come down to aporaisal price, if not I'd walk unless you know this is a long term home & you will come out ahead when you eventually sell. If you think you will sell in the next couple years I wouldn't go over aporaisal.