Real Property Appraisals/Appraisal too low strategy
I have a house in escrow and I want to have a strategy on what to do if the appraisal comes in less than the offer price on the house. I think the company that we are buying it from, who bought the house in foreclosure and remodeled it to sell it at a good price, wonít want to negotiate if the house appraises at lower than the $277,000 we offered on it. Then the mortgage company will need us to offer more cash up or for there to be some kind of negotiation on the price. My fear is the company we bought it from will not be willing to budge on the price and say take it or lose your earnest money. I havenít gotten too much from my real estate agent as to what to do if that happens, but I am asking you to try to develop a strategy ahead of time to negotiate in case that does happen.
You didn't say if the appraiser has already been to the house. If he/she hasn't, immediately get with your agent, search for and print out what are called "client copies" of all the relevant listings and sales in your neighborhood.
Don't withhold those sales that are lower than your sales price. There has to be a reason that the lower priced sale sold for a lower price. You need to show the appraiser why it sold for a lower price - wasn't as upgraded as the one you are buying, was in terrible condition, etc.
Be sure either you or your agent meets the appraiser and provides the data. Unfortunately, my peers are doing such bad work that you may get one of those appraisers that doesn't accept help from agents or buyers.
Also - unfortunately, you can't assume that the appraiser is going to do his/her job and properly value this home. If you have nothing better to do, on this site, search for "bad appraiser", "bad appraisal" to see some of the answers I have given to people who have received bad appraisals. YOU HAVE TO become just as familiar with the neighborhood in which you are buying this home as a defense against a poor appraisal.
If/when you receive the appraisal, and it comes in low, immediately get a copy of the appraisal, by Federal Law you are entitled to a copy. Sit down with your agent and go over the comparables and adjustments the appraiser used. You probably want to get in your car and drive by the homes the appraiser used to see for yourself if the sale is a comparable home.
Don't try to fool yourself. The sale price for this home, especially since it is a "flip" by an investor, just may not be reasonable and may be way too high. The appraiser just may do a good job and show that the property, no matter how well it is upgraded, is not worth what it is listed and has sold for.
However, if the appraiser has chosen poor comparables, or has not adjusted for the upgrades in this house, you need to immediately take your comparable set you previously obtained and send then to the appraiser and ask for a reconsideration. You also need to send the data to your lender to show that the appraiser failed to properly appraiser this property.
Good luck in buying this home
John C. CArlson
CA Certified General Real Estate Appraiser
Victorville and Diamond Bar, CA