What if the appraisal comes back too low?
It seems to be happening a lot over the past couple years in the Denver Metro Area. Real estate agents are doing CMA’s (comparative market analysis) from the Buyer’s point of view and from the Seller’s point of view when pricing the property and when making offers. So what happens when the Buyer and Seller have agreed to a price and everyone thinks the appraisal will be fine but to everyone’s surprise the Appraiser told the bank the house wasn’t worth what everyone has agree to?
Even though the buyer is willing to pay the price, if they are getting a loan and the bank doesn’t think it is worth what the buyer wants to pay, the buyer cannot pay the price they agreed to even if they are bringing money to the table. It would be considered loan fraud if the buyer and seller had an outside agreement, of any terms not disclosed to the bank through the HUD or in the contract.
So, what are the options?
- The Seller and Buyer can contest the appraisal and have another one done or have someone take a second look at it. This could delay the closing so everyone just needs to be aware and be in agreement, not knowing what the outcome will be. Just because you contested it, it may not come back any better.
- The Seller can drop their price so the Buyer can still purchase at the appraised price.
- As long as you are within your contract dates, the Buyer can back out of the Colorado Buy Sell Contract and get their earnest money back.
If you have interest in selling or purchasing a home, please give me a call, or email me with you contact information so I can call you. 303-995-3180 or amycesario@gmail.com.
Living Denver,
Some tips from an appraiser. Remember the CMA you did when your listed the house may be VERY out dated. We are required to have at least two comps sold within 90 days. All comps need to be within 20% +/- the size of the subject. Some lenders require bracketing of size and bracketing of both the adjusted and unadjusted values. If there has been major remodeling, most investors require permits to have been pulled AND signed off on. Not all appraisers will agree, but I love having a packet waiting for me at the house from the listing agent. I might not like your comps but I still like it. If you have had the house measured, leave a copy of the sketch. But please don’t yell at us, call us crazy (happened to me twice today from an agent), or threaten our license. We are doing a job and were hired by the lender to protect their interest. If I call the agent, and ask for comps, I am doing you a favor. I could just kill the deal and move on to the next one.I wish more realtors would keep up with lender requirements, then maybe less appraisals would come in under value. 🙂
Thanks Claire! I appreciate your passion and that you are always willing to help us Real Estate Agents!!!! Claire has done pre-lisitng appraisals for me over the years if I had a “hard to price home”. I would recommend having this done to help get it right the FIRST time. 🙂