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Buying or Selling a Home/Disclosing a bad appraisal

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Question
We are selling our home in California (Sacramento Co.).  We recently accepted an offer but got a "low-ball" appraisal ($30,000 under purchase price).  We challenged the appraisal, but our buyer's underwriter would not accept the challenge and our buyers pulled-out of the sale.  Now we're back on the market.  Our Realtor is telling us that he must disclose this low-ball appraisal to any new buyers.  I understand that the home/pest inspections and appraisal did bring forth some structural defects that we will need to disclose now that we are aware of them, but I can't see how we are obligated to disclose the actual appraised value.  The appraised value is the opinion of one appraiser and is not a factual defect with our home, as a structural defect would be.  When we questioned our Realtor about this, his answer was, "it's always better to disclose, disclose, disclose".  We fear that if our prior low-ball appraisal is disclosed, any new buyers who come along are not going to feel that the home is worth more than the low-ball value.  My question--are we really obligated by law to disclose this appraisal?  This appraisal was ordered and paid for by the previous buyers...shouldn't the new buyers order their own appraisal and rely on that value (which in all likelihood would be higher)?  Thanks for any insight you can give!

Answer
Hi Rebecca.

Thank you for your question. I completely agree with both you -and- your Realtor. I know that reads as a conflicting statement...My reasons: As Realtors we are continually reminded to DISCLOSE! Anything less can get us -and- our clients in judicial hot water.

Your Realtor's obligation is to disclose and educate other Realtors as to why you are asking for more than the appraiser's market value. Our colleagues' obligation is to educate their buyers and suggest to these new clients, that they submit an Addendum to their offer regarding a 'less than full price appraisal' should their lender's appraiser provide a lower than asking price market value. This Addendum will become a negotiating item. In my opinion, you should allow your Realtor to suggest one to the next buyers' agent. It will ease the new buyers' minds. When this is done effectively, you will get another set of buyers quicker and with less tension and disappointment.

You may also be right regarding what is LEGALLY required. As this can be a VERY slippery slope, I suggest this research: http://www.dre.ca.gov/files/pdf/re6.pdf  As you can see, it is taken directly from the DRE, Department of Real Estate, website and is accessible to the public. This may make for a bit of an awkward conversation with your Realtor. But, at least you'll both be on the same page.

2 important points: You can also pay for an appraisal to offset the provided one. There is risk to this, as you will need to disclose that report -and- bare the cost. The other is, and I completely understand how difficult this is to work with, the appraiser -may- be right. After all, this is what they do for a living. As you know, I don't know the facts, or your area in Sacramento. So, I can't respond to any of those details. I'm just throwing that out there...

It's a stressful and emotional time for everyone involved -- you, your family, your Realtor. Everyone pulling in the same direction with empathy will help. Hang in there, Rebecca!

My best,
Kathryn

Buying or Selling a Home

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Kathryn Hisert; Realtor

Expertise

Everyone deserves an answer! My rounded background will provide you with information beyond ‘just’ buying and selling. I can answer questions regarding short sales, foreclosures, deed-in-lieu, home staging, vintage home related concerns, most mortgage related questions, and divorcing couples’ housing options. I am a research oriented individual who strongly believes in connecting all the dots and providing as much, or as little, information and communication my clients want or need. My expertise is in San Diego and Santa Clara Counties.

Experience

After 25+ years in the Financial industry, Sales and Marketing, I came to the real estate industry as a mortgage loan agent. From 2002 to 2010 I was my clients' Realtor and loan agent. Since 06/10 I have been strictly a Realtor.

Organizations
N. San Diego County Assoc. of Realtors California Assoc. of Realtors National Association of Realtors

Education/Credentials
CDPE (Certified Distressed Property Expert) CREDS (Certified Real Estate Divorce Specialist)

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