Expert: Diann Tonnesen - 9/11/2008

Question
We are selling our townhouse and bought a house. I’ve been married for 2 years and I am 27 years old and 5 months pregnant with my first baby. Our selling price is 63k and someone has already signed the contract. We were suppose to close this Tuesday. 2 weeks ago the appraiser came to look at it and we just found out today that it only appraised for 53K now we are screwed because buying a house is contingent to the selling of the townhouse.  The townhouse is fully updated, interior and exterior paint, light fixtures, stainless steel appliance  (stove, dishwasher, double sided fridge and washer and dryer stays too) What are our other options?

Answer
Hi Shanna,

The appraisers are really lowballing the appraisals these days. They are so afraid of losing their licenses that right on the appraisals they will type something like "Property was appraised at the low end of the value scale due to declining market conditions." How the heck are properties ever going to increase again if they keep appraising them on the low side?!!!

Anyway, your options are as follows:

1. See if your agent can pull some comparable sales that are higher, send them to the lender and try to get a "reconsideration" on the appraisal. I have done that several times with success depending on the strength of the comparable sales available.

2. Reduce the sales price on the townhouse to the appraised value (if you have enough equity to do so) and try to renegotiate with the seller on the home you want to buy to contribute 3% towards your down payment. You will have to do this quickly because the FHA down payment assistance program may be going away October 1st. (Though there is some proposed legislation that may extend the down payment assistance program based on the buyer's FICO scores.) You would need a signed contract and full loan approval with program and rate lock prior to September 28th to qualify for that program.

3. Rent the townhome out and renegotiate with the seller of the home as above in option 2. However the lender will only give you a percentage of the proposed rental income to offset the current mortgage payment. So you would need to be able to qualify with some additional debt.

4. Stay in the townhome and cancel the deal on the home.

It may be that you have some savings and won't have to renegotiate with the seller of the home about the down payment assistance and can just choose either option 2 or 3 without that.

Buyers and sellers (and agents!) are really having to jump through fiery hoops these days to get transactions closed. I really hope that maybe one of these options will work out for you!