Appraisal Problems: Options as a Buyer and Seller When a Home Under Appraises

by Broke Professional on February 22, 2011 · 44 comments

Yesterday we used our day off for President’s Day to schedule a home inspection on what will hopefully be our very first home.  As you may recall, this is our second time we have made it past the attorney review period in what is our now seven+ month quest to purchase a home.  As our prior post on the subject detailed, the first time we attempted to buy a home things did not go so well during inspection.

Needless to say we were both very stressed out yesterday about the prospect of another house deal falling apart due to inspection problems.  Even at the inspection stage buyers might have already dumped $500.00-$2,000.00 into the home buying process.  Luckily the home passed its inspection with flying colors.

“This time it’s going to be different”, we said.  “Everything is going great!”  And it was… until today, when the appraisal came back.  The verdict: the home under appraised by $6,000.00.

Home Appraisal

I am sure in this market plenty of buyers and sellers are facing this exact difficult scenario.  When I first learned the appraisal report results I was really hard on myself.  “What kind of an idiot am I?” I thought.  “I’ve been looking for a home in this market for six months.  I thought I knew the market pretty well by now, and I still got ripped off!”  With reports of a possible imminent double dip in housing this was the last thing I was hoping for, even though we plan on this being our “forever house.”

Once I got past my feelings of frustration towards myself and my worry over the house deal falling apart, I decided to talk to a few real estate attorneys I am friends with and do some online research on the available options if a home under appraises.  Since we are going the 15 year FHA mortgage route, the home has to appraise even though we are putting a healthy chunk of cash down.  This under appraisal will also have to be disclosed by the seller to any other FHA buyers during the next 6 months*.  As far as I can discern, there are three major options available to buyers/sellers when a home does not appraise.

Option #1 If a Home Under Appraises – Ask the Seller to Lower the Agreed Upon Price to the Appraised Value – The seller is in a difficult situation here.  If the buyer walks they will only lose the cost of inspection and other related costs.  The buyer need not purchase this house and in many instances does not need to purchase a house at all.  The seller on the other hand generally wants out of the house, and will have to sell the house at some point.  Divorce and death make up a lot of selling situations, so there are often time constraints and outside factors at work.  If the seller does not take less money now there is still no guarantee this whole scenario will not play out again the next time around.  There is also no guarantee (in most instances) that another buyer might even be willing to pay this price in the first place.  In a down market this type of scenario only gets tougher for the seller.  At the same time, some buyers can get emotionally attached to the property.  I know that personally I am quite sick of the house search process.  I am even sicker of my apartment.  Finally, part of my personal code of honor feels slightly bad about trying to now pay less than I previously agreed to pay.

Option #2 If a Home Under Appraises – Buyer Walks – Most real estate clauses will contain a contingency that will protect the buyer if they cannot obtain a mortgage.  In a situation where a home does not appraise, the buyer may decide to walk if a seller decides they will not eat the difference.  This is obviously not an ideal situation for either party.  The buyer must have seen something in the home that made them want to purchase it and the seller will in most instances have to take less money later on down the line anyway.  (particularly right now when the market seems to be spiraling further downward).  If this occurs the buyer would still under most circumstances have the option of bringing more cash to the closing to make sure that the deal still gets done.

Option #3 If a Home Under Appraises – Negotiate Somewhere in the Middle – Perhaps some magic can be worked with closing costs or the like.  There are usually no hard and fast rules.  For instance, in our example we could meet in the middle, we could pay $1,000.00 and the seller $5,000.00, or anywhere in between, unless we could not obtain a mortgage having done so.


Although a home not appraising is not ideal for either the buyer or the seller (and we certainly wish we did not have to personally deal with it), there is no reason why an under appraisal has to (unless the house drastically under appraises) be a deal breaker.  To be sure, a lot of the above assumes there is not too large of a disparity between the homes appraised value and the contracted for purchase price.

We have asked for the seller to agree to take $6,000.00 off the purchase price but we stand willing to bargain to some extent as necessary.  Again, a lot how you would go about handling this situation comes down to personal preference and individual style.

That said, if we have to walk away, then we will.

Here’s hoping that does not happen.

Anyone have any experience as a buyer or a seller with a home under appraising?  Any creative ways around this problem that I have missed?   What do you think we should do?  Is it immoral to agree to something and then try and back out, or is that just a smart financial decision?  Let me know what you’re thinking!

(*Please note that I am not giving legal or any other type of advice, but rather talking about my own experiences in New Jersey.  The law may be different where you are or even different in New Jersey depending upon your situation.  As always, please consult with a proper expert if you require such expert advice.  Thank you.)*

{ 44 comments… read them below or add one }

1 101 Centavos February 23, 2011 at 6:57 am

On our last purchase, the house on the property was under appraised. The gentleman doing the valuation did a drive-by, and was put off by the insul-brick exterior of the house, which frankly could stand a face-lift.
Low appraisal, therefore no possible financing, so we walked. The seller came back to renegotiate and the final cash price down ended below our initial offer.


2 Mr. Broke Professional February 23, 2011 at 7:45 am

Hopefully we have the same result that you did.


3 Pamela February 23, 2011 at 7:34 am

Don’t assume a low appraisal means you misread the market. Appraisals are coming out 30% lower than purchase prices in many parts of the country. Often this has to do with new ways appraisals are being ordered.

Even under the new laws guaranteeing independence for appraisers, real estate agents are allowed to speak to the appraiser and provide comparable houses. If your agent believes the price you agreed to pay for the house is fair and can find 3-6 comparable sales, you should ask him to contact the appraiser.

You’re not the only one experiencing this problem. I wrote two posts this week on changes in appraisals and how they’re affecting first time home buyers.

I’m sorry this has been such a stressful experience. But I was glad to hear you got the information you needed from your first home inspection. The only thing worse than paying for an inspection on a house you won’t buy is buying a house and having to pay the price for not having an inspection for the whole time you live there.


4 Mr. Broke Professional February 23, 2011 at 7:47 am

Thanks. In some ways as a buyer an under appraisal might be a good thing. (We might get the home for less money). At the same time, you don’t want there to be bad feelings or for the deal to possibly fall apart, so that has to be considered as well. I did not know about all the appraisal changes, I will have to go check out your site and learn more about what is going on. Thanks for pointing me to your posts and for the tips.


5 MoneyCone February 23, 2011 at 1:51 pm

We are going through a similar process and I have to tell you it is very stressful!

Hope you find your dream house soon BP!


6 Philly area February 23, 2011 at 5:32 pm

Well, I wouldn’t worry about the ethics of it – that’s the whole reason the mortgage contingency is written into the contract.

I know several sellers to whom this happened repeatedly. The smart ones split the difference with the buyers. The ones who didn’t have had to lower their prices again anyway. I know at least 3 sellers who are now asking at least 10k less than they’d have gotten if they’d just have met that low appraisal in the first place.


7 Mr. Broke Professional February 23, 2011 at 6:52 pm

I think that is the reality of the situation. If it came down to pure logic then we would be set. Unfortunately, people do not always make the right decision. So, we might end up losing the house despite the realities of the situation. I think a seller should be happy with splitting in this situation.


8 Lin April 1, 2011 at 8:52 am

I live in california and just had a very similar thing happen to me. Our first escrow we had to get out of due to the home inspection finding foundation problems. We found another wonderful REO property that we thought was priced well. It passed inspection and I thought we were well on our way to buying a home. Then came the appraisal…… the appraisal came in ten thousand less than the asking price! We did NOT have the money to make up the difference in price. Our ONLY hope was getting the seller (the bank) to come down in price to meet the appraisal. We were very fortunate as the bank DID reduce to price to meet the appraisal, HOWEVER, we were required to pay much higher closing costs. The bank was going to pay the costs but in order for the deal to go, we now were required to pay the higher closing. We were fortunate again to be able to do this and proceed with the purchase. Appraisals are killing sales all over our country! Perfectly qualified buyers are not able to purchase a home due to low appraisals and banks not willing to reduce pricing. This is very frusterating. Unless you have the cash, the deal will be killed! This trend is destroying sales everywhere! Low appraisals are the new deal killers and making it almost impossiable to buy a home! Hopefully this trend will stop soon!


9 Mr. Broke Professional April 1, 2011 at 9:26 am


I think the banks are just so skittish about falling home prices that they are keeping the appraisals really lower. The market is supposed to continue dropping, so perhaps they are smart to do so. That said, it certainly was a pain in the neck to get through everything only to find another hurdle. Luckily for us the seller made some concessions in price and we were able to close on the deal and move in this week. Congrats on your new home as well!


10 Karen November 6, 2011 at 5:08 pm

I totally agree.
I (the seller) have been in tears the last two days due to a very low appraisal. My husband and I spent over $25,000 on renovations and our property is about 1 acre and has a 2,600 sq ft man cave workshop with a car lift and beautiful azaleas, fruit trees, big oaks, car port behind the shop, a very large concrete pad beside the shop that you could park a huge Rv or make into a basket ball court. Our home is all hardwood floors and ceramice tile. We have upgreaded kitchen counter tops, new roof, fairly new windows, the works. We have a huge Master Bedroom with walk-in closet, and the Master bath has totally been renovated and so on.. The buyer got a VA loan and they underapraised our home by $56,000. The house is in great shape! He does not have the funds to make up the difference. We are heart broken because of the large investment on the renovations and now we cannot even sale it due to one guy who has the position to appraise it. The sad thing is that both realtors my husband and I, and the buyer all agreed on the sale price but because the bank does not want to loan but 80% of the real value our buyer will likely walk. We were suppose to close this week. Our realtor gave the appraiser all the new specs and we have yet to hear back from them. It would not be so bad if it was just $5000-10,000 but $56,000 difference!!! Our home is weel worth the sale price and we all agreed. We need help and answered prayers. I am a basket case.


11 tebby May 12, 2012 at 2:01 pm

I know this is an old thread, but 30 years ago a real estate agent told my parents “don’t bother doing upgrades it doesn’t really add to the value of the home”. Now what did my parents do they just never FIXED anything period let alone upgrade. they’d wait till something broke and then decided to deal with it. Now thankfully they bought this home to live in till the end it seems but with your situation it seems their real estate agent was correct in that statement.


12 Patrick Bain June 18, 2012 at 1:17 pm

The truth is that in many cases, when selling a home you want your home and its upgrades to be in that nice medium area. For those that continue to shower upgrades on a home to turn and try to sell it, its great for marketability but in most cases doesn’t add to equal value. In a case where someone believes that they should never add upgrades throughout the life of the ownership of that home, be ready for a lack of marketability and in many cases not being able to pass HUD standards. I always encourage anyone ready to list of sell a home (especially a unique property) to at least talk to an impartial party (preferably a seasoned appraiser) to see what the market will hold from a value standpoint. Are you adding $30,000 in improvements to a $100,000 home when the market in that area will only support $115,000 for a higher end home? Not smart. Be aware of the lowest and highest range of your market prior to adding upgrades. And talk to an Appraiser.


13 lynnette April 9, 2011 at 11:48 am

Yes I’ve JUST gone through the very same thing! Our first house fell out of escrow due to a FOUNDATON issue with the home during inspection. We walked. It would have taken thousands of dollars to repair the issue. The SECOND home and second escrow came in at 10,000 dollars lower than the agreed upon price. We did NOT have that kind of cash to make up the difference and cover closing so we asked the seller wich is the bank to lower the price to match the appraisal. This is risky because banks are already at rock bottom pricing and are usually not willing to drop any more but this was are ONLY hope. We were very fortunate because the bank DID agree to drop the price. HOWEVER we were required to pay more closing costs to the amount of 1,500 more. More than expected. We were also fortunate to be able to meet that requirement. We just closed the sale. Our closing costs ended up being 5,200 dollars. We signed the loan docs and are currently to fund. This will happen within the next couple of days and we will receive our keys. Its been a long hard řoad. As this was our fifth bid and our second escrow and after months of searching and bidding it is finally over. The low appraisal almost killed this deal. If the bank would not have came down we would have been out MORE inspection and appraisal money. This can get expensive fast! I really hope things work out for you as well! Its scarey because when you take the option to ask to lower the price it all is in the hands of the bank and what they are willing and able to do. Many deals die because they are not willing or able to reduce the price! Low appraisals are now the new deal killers! Property all across the country are comming in low due to the fact that there are so many forclousers and these forclousers are used as comps during the appraisal process. They use them because they are the ONLY avaiable compariables. Its a very scary market right now. I feel very fortunate to be able to close on our transiation with all these stumbling blocks in the road of the deal. Many people suffer due to the low appraisal trend. Its not an easy thing to buy a home now days. I loved your article and thought it was written beautifully! Its really a challenge now to try and buy a home! I wish you the best of luck! Hopefully things will work out well!


14 Minhaz April 18, 2011 at 4:36 pm

We’re going through the same situation. House under-appraised by 45k! Seller refusing to budge, and we’re already paying 20% down, so really don’t have the money to pay another 45k out of our pocket. We’ve already sunk money on the inspection, appraisal fee, attorneys for NJ, so we’re stressed out. To top it off, our current home, we have renters lined up but can let them move in unless we close.


15 Megan May 15, 2011 at 11:34 pm

This seems like a horrible systemic problem to me! How are housing prices ever going to recover or reflect market conditions if appraisers are being overly-conservative? In fact, it seems like a disastrous situation that could CAUSE housing prices to decline even further!

I am very frustrated, as I have agreed on a purchase price with a buyer. That seems like market forces in action to me, so it is frustrating that our deal may fall through due to overly cautious appraisers.

How will prices ever be allowed to go up, if the appraisal is based on and come in below comps sold within the last 3 months? It is not possible unless buyers agree to pay more than their lender will give them, which seems like a lot to ask.


16 New buyer June 15, 2011 at 10:57 pm

My husband and I are also in the process of buying a house. The house that we are looking at did not appraise. Originally, it was agreed that the sellers will pay 3.5% of the closing costs. But when the appraisal came out, they changed their mind. They were not willing to pay the closing costs but is willing to lower the price from 220,000 to 213,000. We did not agree! We told our attorney to make a letter to drop the deal. We just want to walk away and find another house. However, when the sellers found out about this, they agreed to lower the price to the appraised value of 213,000 and is willing to pay for the closing costs of 3.5%! So, just be patient and never hesitate to negotiate.:)


17 First Time Homebuyer August 4, 2011 at 1:19 pm

I’m currently under contract to buy a home. Like many of the previous contributors, the home that I am intending to purchase appraised below the offer that was made. The seller previously had an appraisal done that came in a bit higher (emphasis on a bit) than the lender-ordered appraisal. As a result, the seller refuses to budge on the price and re-negotiate. Because of that, I am seriously considering taking option #2 and walking away from the deal. The reason I’m considering just walking away instead of negotiating is that the difference between the appraisal and the offer is $5K. So someone would rather not sell a home over $5K? That to me is absolutely crazy.

If the home is that important to them, then maybe they should keep it. Or maybe the threat of not selling their house after nearly 120 days on the market will jolt them back to reality when they had an offer yet rejected it because of FIVE THOUSAND DOLLARS. What’s even worse is that they are not even contributing to closing costs. Not one penny. That, to me, is a cheapskate. Don’t sell a house if you’re not willing to come down on your price or contribute towards closing costs. You’d be better off just living in the house, if you ask me. But obviously there’s a reason you want to sell, so you should get off your high horse and re-negotiate.

Do you guys think threatening to walk away will help? Or do you think they’ll just continue to have their heads buried in the sand?


18 Pamela August 8, 2011 at 6:03 am

Okay, first time home buyer. Take a deep breath.

Yes, the seller is being stubborn and you’re both under a lot of stress. But getting offended by the seller’s actions isn’t helping you make a decision.

There are only a few questions you need to ask yourself:

1) If the seller refuses to lower his price, can I afford to chip in the extra $5,000 to make the deal go through?

2) If $5,000 is too expensive for me, do I want to approach the seller with mollifying words and try to negotiate despite his saying he won’t negotiate? (Kindness is a better negotiating tactic–phrases like “I understand how frustrating it must be to see your house losing value. I’m finding it pretty scary to buy a house myself” might be a good start.)

3) Do I love the house enough to do either of the first two options? If not, walk away.

Whether you should walk away or not has nothing to do with the seller being petty. Your decision should be based solely on whether the house and its price work for you.

Good luck thinking this through.


19 Goran Kocev March 6, 2012 at 5:57 pm

That is a very smart advice. The consequences of anger are hundred times worst than the cause. Anger wouldn’t solve anything. I am going through this same situation right now and that’s why I am reading these posts. My problem is the condo appraised well , but the underwriter is not happy with it and needs justification of the numbers. The condo appraised for $76k, but no one knows the lesser figure so we can not even negotiate with the seller. My lender is not helpful at all, has no idea what is going on, doesn’t return emails, phone calls, and even though the best thing for saying thank to him is to refer him to my friends , he is not getting any from me. :)


20 First Time Homebuyer August 10, 2011 at 4:35 am

Thanks Pamela for the advice. I do not have an additional $5K, which was the reason for my initial frustration. Apparently neither does the seller. They are losing money big time on this deal due to falling house prices and the relatively short time that they have been in this home. That’s why they are being so inflexible with the $5K thing, which is understandable but not my personal problem.

I have tried to be flexible despite the seller’s reservations/lack of money but have not received a response. My realtor has contacted the seller’s agent regarding a proposal to settle everything (including a reduction in commission to be paid out, which has been agreed upon by both agents, and both the seller and myself kicking in some extra funds) at least twice within the last 3 days and not heard anything. The bank has now contacted me and given me an ultimatum: either agree to come to closing with an extra $5K or renegotiate with the seller by Friday at the latest.

Now I’m between a rock and a hard place. I have been more than flexible and generous to the seller who has no funds (although they recently had a lavish wedding) and now I’m on the verge of not closing on a deal and having nowhere to live starting on August 31. So much for being a buyer’s market.


21 Jessica September 13, 2011 at 9:17 pm

At least all of you got as far as getting an offer accepted. My husband and I found our dream house in Florida that was perfect for a price that was well within our budget, even at full price. We offered 125k with them helping with closing costs and the full price being 135k. We didn’t offer more mainly due to the 3 comparables for that community being sold at such a lower price. One went for 95k (but that one was in foreclose so that didn’t really count), 110k and 115k and those were both 1 story homes while this one is 2 stories (and the only one with a big porch). We are financing through FHA and I guess someone before us, also financing with FHA, got as far as an appraisal that came in around 110,000 for the home. Apparently, the owners didn’t want to negotiate any amount or whatever the case may be, long story short they rejected their offer. (Mind you this is the speech I got from my realty when I called and asked if he heard anything about our offer) Basically they rejected out offer too and now the home is listed for 129k but it says cash or conventional loan only.
I don’t understand what difference does a FHA or conventional loan have, the appraisal being low is still an issue they’re going to have to accept. They’re an older retired couple, bought the house in 1984 for 88k and the original owners so it’s not like they’re not making money regardless. We’ve been looking at other homes and I honestly feel I’ve made a mistake, as a first time home buyer, becoming emotionally attached to this house. My husband just thinks we should wait it out to see if the sellers come down to closer price to the appraisal but I don’t think it will still be available. That neighborhood rarely has homes for sale which is why the comparables were so few. I was thinking we should try to maybe shop around to see if we could get a deal for a conventional loan and hope by then they’ve accepted reality that few people want to pay more than a house is appraised and just lower their price. Although online, they were saying conventional loans could have higher interest rates. I’m so confused, maybe I should just move on :(

Any suggestions?


22 First Time Homebuyer September 15, 2011 at 4:11 am

Unfortunately it sounds like the owners of the home you want are not going to budge on price right now. If FHA approved for $110K, that’s all it’s going to appraise for within the next 6 months, whether the buyer is FHA or conventional. And anyone would be crazy to pay $129K for a house that’s only appraising for $110K. They’re instantly in the hole $19K. Makes no sense.

While it’s easy to say “walk away”, it’s also difficult because you get emotionally attached to these homes. I know from personal experience. You can look at my previous posts and tell that I was attached to the home I was under contract to buy. You just have to know what works for you and your budget. If a home is older, I would not try to pay more just so that someone can line their pockets. If they bought the home for $88K way back when, they certainly have equity in the home and they are really just looking to bank some money. While it’s good that they are profiting from this deal, they also need to realize that it’s not that kind of market where you are going to to $20K over what it’s worth. Sometimes you’d be surprised at the concessions people make when they really want to get out of a home. But my advice would be not to put all of your eggs in one basket.

I’d also like to share that I closed on the home that I so desperately wanted on August 31 so I am officially a homeowner. :)


23 Jessica December 13, 2011 at 8:47 pm

Hello all,

Just wanted to check back and let everyone know we closed on the house we wanted and are also offically homeowners too.

We went and got approved for a conventional loan in which the home appraised for 125k which was perfect since we put in for 120k and they accepted. I was a little disappointed to find this home was located in a special flood zone but I was able to get a good deal. My advice to first time homebuyers is never give up!


24 Lisa October 20, 2011 at 8:56 am

Though I’m sorry to see so many people in the same boat as we are, I’m glad we’re not alone. None of the upgrades we added to our new construction home seem to have added to the appraisal. Base priced at 191K, we added 40K in upgrades. The home appraised for 205K based on being in a new neighborhood…apparently the only homes they can comp are those that were sold through a realator? This neighborhood is being build by a single builder, no realators involved. Very confusing. So, at present, our bank and builder are attempting to provide more info to the appraiser in order to increase value. Here’s hoping….


25 Lisa October 20, 2011 at 9:02 am

Though I’m sorry to see so many people in the same boat as we are, I’m glad we’re not alone. None of the upgrades we added to our new construction home seem to have added to the appraisal. Base priced at 191K, we added 40K in upgrades. The home appraised for 205K based on being in a new neighborhood…apparently the only homes they can comp are those that were sold through a realator? This neighborhood is being build by a single builder, no realators involved. Very confusing. So, at present, our bank and builder are attempting to provide more info to the appraiser in order to increase value. Walking away isn’t really an option fo us, we had the home custom wired through an independent contractor. This is our dream home.

We’re supposed to close on Halloween….here’s hoping….


26 Mike & Nicole October 26, 2011 at 1:33 pm

My wife and I are also in a similar situation….house we looked at (that my wife loves and I like) was originally priced at 119k. The house eventually came down to 109k. We offered the sellers 105K plus 5k in seller’s concessions. They accepted the offer, only to have to the house come back appraised at 73K.

I can honestly say that none of us saw that coming. Our Realtor was fairly astounded to see it come in so far under the asking price. The house itself is immaculate. It has totally been redone inside and out since 2008. The sellers have receipts from the work they did in the past three years totaling in excess of 70k.

I would have a lot more faith in the appraisal if the appraiser had not misspelled several words, not bothered to capitalize city and state names, and indicated on the appraisal that there had been no updates on the home in the last fifteen years (which I find particularly troubling as the listing agent was there and had indicated that the appraiser had asked him several questions regarding the upgrades to the home). I am just as culpable of misspelling words as the next person, however, I highly doubt I would do so on an official document. It makes me ask the question that if they did not take the time to properly address something as trivial as that, how can I be assured they took the time to do a proper and thorough appraisal of the property in question?

We have attempted to appeal certain aspects of the appraisal however given that the appeal goes right back to the same appraiser she has been very reluctant to change anything (the fact that an appeal process ends with the same person who is believed to have been negligent in the first place is ludicrous–of course they are going to defend their findings, anything other than this and they have to admit they were wrong).

Very Frustrated First Time (Attempting) Buyers here too!


27 Pamela October 26, 2011 at 5:33 pm

If your agent was surprised, she is your best ally. New laws regarding appraisals do not allow people to harass appraisers about their findings. However, if your agent or the listing agent has comparables that are more in line with the asking price, they can legally provide that info to the appraiser and ask him to take it into consideration.

That would be my first step.


28 Lisa November 8, 2011 at 10:51 am

An update on our home…after attempts to get the appraiser to look at different comps and adjust his appraisal, he refused to budge. The builder then agreed to meet us half way on the difference (only after he tried like hell to come up with financing options to get the sale price). He is absorbing 15K and we are borrowing as much from our 401K to meet him. Robbing from our retirement was never an option until losing the home became a possibility.

Needless to say, our builder will never allow this appraiser to be used on his homes again as he has never had a home under appraise before now.

I wish I had more encouraging news for the rest of you. Best of luck.


29 Terri November 29, 2011 at 9:57 am

Hi All,
I am in this situation. We found a lovely gem in the rough that was about 100k more than we wanted to spend. With four acres and a big unfinished upstairs this old house was what I wanted for many years. There is unlevelness in most rooms, the floors go up and down, there is no central heat & air and the floors and walls are screaming to be refinished/painted, etc. Most windows are broken, original and non-functioning. Two of the four fireplaces are sealed off and the other two haven’t been used in over a decade. Yep. They listed at 250k last Sept. Then they dropped to 220k in April. We calculated what the house needed in work to be livable, not talking granite or tile here…. and then what it would be worth and subtracted the difference. We found that 145k-165k would be a fair offering price. These “upgrades” aren’t for fancy living but for warmth and saftey and habitability. The tax value was 149k. We offered 145k and they would not counter. So we waited two months and went back at 160k. They had lowered the price since out offer to 210k. So after a week we came to agree on 186,500. We didn’t like it but knew we could make it a grand home for us. During inspections we found powder post beetles and a septic tank that was shot. They treated the beetles but only offered 2500 on the septic and said no to other things we asked for like GFI and venting for the dryer, etc.
24 hours before the Due dilliegence was up we got the appraisal back and low and behold…..167k. Now we are waiting to see if they will drop the price. I know the appraisal is right and the sellers have been unrealistic all along. We will see what happens. We extended DD to the 12th. Wish us luck…..


30 Darryl December 10, 2011 at 8:56 am

I recently looked at a model home that the seller had listed on the HAR for 238k and was closing out the subdivision. I spoke with my realtor, which is another issue. We made initial offer of 180k and all the closing cost covered by the seller. Long story short, we agreed on 190k and the seller pays the Owner Tax & Insurance. I’m scheduled to do a walk through on Tuesday and close on the December 20. However, yesterday the appraisal came back 13,500 lower than what was agreed upon. I’m using the VA loan and I know they want approve the financing at this price. The seller told me that I need to come up additional 6,750 to make up the difference. I’m a bind financially due to person crisis that just recently occurred which I had to paid over 10k to cover my mother funeral and don’t have financial mean to add the additional cost. My relator is being difficult when it comes to foregoing the btsa that she manipulated into the contact. I love the home and would like to keep it but this has created a major problem.


31 Brian Palmer December 17, 2011 at 12:11 pm

My wife and I are in the process of purchasing our second home. We are renting out our first home with the VA Loan and using a FHA for our second home in Florida. Just found out FHA requires a second appraisal!! We should be closing in six days and the first appraisal was 4 thousand lower than the agreed price.

OUR ADVICE: Don’t get emotionally attached, everything happens for a reason. Just remember most homes being sold are STILL in a declining market. Buyers & Sellers need to understand this. I hope everything works out for people purchasing and selling.

We are making money on our home in Arkansas, renting is a good risk in my eyes. Not a bad route if you can get approved for a second mortgage.


32 Heather January 10, 2012 at 9:44 pm

Ah, the saga continues. First-time homebuyer who just received an appraisal for $15,000 less than the contract price. The seller is very emotional and unwilling to budge (first counteroffer was for a few thousand under asking) on a $159,000 asking price. Even zillow values the house at $137,000. And to top it off, it is an estate sale! Hoping the seller comes to their senses but in the mean time I am going off the deep end.


33 Donna January 23, 2012 at 1:25 pm

I am trying to sell my house! I have moved out…after a year I finally got a buyer we have agreed on everything..I am already losing about 9 grand to make this sale from what i purchased the hosue from ten years ago. However, the appraisal came in 9,000 less than the price..I’m waiting to see this appraisal report. the problem i can tell you with my house is comparatibales. I bought the house 10 years ago brand new. they knocked down an existing house and built it. However there are only two like it in the neighborhood that have not been sold in the past 5 years. All other were built over 50/60 years ago and not even close to the same, old kitchen, no updates, if so very little, some no central air!!! Therefore, they are selling 50,000-60,000 less than my house! Now, I am going to lose 20 grand on the house! I wasn’t “overpricing my house” i priced the house to sell and w/o being greedy excepting a loss due to the market..but it is not fair for mortgage companies to rely on one person appraising a house! People do make mistakes…these are our lives they are screwing with and our money!


34 Justin February 16, 2012 at 2:14 pm

Same story here. Just found that the VA underapprasied the agreed upon price. The frusterating part is that we cant even see how much it is under by. They said it is illeagal to disclouse that information. Is that the same experience any of you have had?


35 jennifer April 4, 2012 at 10:31 pm

Can they buyer ask the seller to pay for the appraisal?


36 Laurie May 7, 2012 at 3:41 pm

Is my Relator required to give buyer #2, #1’s Inspection Report? Escrow with #1 fell out because they demanded a large price reduction based on bids for a new roof. The existing roof was found to be fine in their inspection report. I live in Los Angeles.


37 Princeton-Area Homebuyer May 11, 2012 at 6:20 am

We are in this same situation, nearly a year after the original poster wrote about their experience. We recently relocated to the Princeton area of New Jersey and have been aggressively homehunting for the past few months due to a relocation homebuying deadline. First-time homebuyers, found our “dream” first home in a very pricey and competitive market. Everything was going smoothly with our relo-approved lender, Wells Fargo, until the appraisal was ordered. It came back $55,000 under our offer! They told us we had to get the seller to come down, or agree to buy mortgage insurance or come up with the difference ourselves – they will only lend to us based on the appraisal amount. A quick Google search revealed serious issues with Wells Fargo and their appraisal group, RELS Valuation. I am in a state of shock as we have a young child and another on the way, and have already given our landlord notice as well as called movers. Our Realtor is sending other comps to the lender today, but I’m seriously considering cancelling the loan with Wells and moving on to other relo-approved lenders to see if I can get a better appraisal. The Wells appraisal used comps that are outside our neighborhood and hardly considered comparable homes. I am shocked after reading about the number of low ball appraisals happening in the real estate market and deals falling apart as a result. I’m not prepared to walk away from this home yet, but am seriously concerned about how things will pan out. Please wish us luck!


38 Kevin June 7, 2012 at 6:26 pm

This situation sucks! I am a first time home buyer in central california. I am trying to buy a REO that has been on the market for 10 months, we are in contract for 240,000 FHA loan with the sellers paying 8,000 in closing. Everything was going very smoothly untill the appraisal came in at 205,000m, 35,000 less! The house is in a community where the exact model is selling brand new for 259900 and one across the street sold for 252000 in january! My LO and realtor reviewed the appraisal and rebuttaled it, but the appraisor did not budge! Now my only option is to renegoiate price with the seller who is calFHA. I am asking 205,000 and no closing cost. If they dont take it, i will ave to back out:( They have not rejected the offer as of yet but i have my fingers crossed becuase this has be a stressful nightmare! Wish me luck!


39 Sana September 4, 2012 at 3:52 pm

Any update on your house were you able to get a deal?


40 anne September 26, 2012 at 5:52 pm

We are a VA couple in a similar position: a house of the same exact model and upgrades as the one we wish to buy and within a year of same age sold last October for within $1000 of our own accepted offer (ours has one more bedroom and one more full bath, mind you), yet the appraiser for the VA is telling our lender that the house is worth far less, and that it is only valid to look back 6 months. WHY??? The local market has been strengthening. What possible good does this do for anyone?! It just keeps veterans’ families out of nice houses, as far as I can determine. We were pre-approved for a loan amount several thousands more than this price, so they know we are good for it — what is going on? I am so frustrated I want to call up the VA and scream, but I am not sure that would be a good idea. Thinking about talking to a lawyer, though. Will check back here for updates.


41 Ally June 8, 2012 at 1:05 am

I’m trying to buy a foreclosure in San Jose, CA and my offer was right above a cash offer without any contingencies. Needless to say, I was very surprised the bank chose my offer over the cash offer. After wearing off the excitement, reality started to hit home. In order to bid on this particular property, the bank requested that all bidders sign an agreement stating no contingency on the appraisal meaning if it gets a low appraisal, the bank will not re-negotiate to the amount of the appraisal. The property is located in a very nice residential neighborhood, is in moving condition and really clean and walking distance to two great public schools but is surrounding by tons of other foreclosures which bring the property value down. I’m very worried about the appraisal process especially after reading the above stories. Appraisals are just one person’s opinion. Market value is what someone is willing to pay and truthfully I don’t think I’m overpaying for this property especially in the Silicon Valley. The Current Market there has a low inventory and a very high demand which should increase the home value but once again Appraisers are screwing up the Market. Appraisals are Jokes!!! Hopefully my first home will pass the appraisal. Prayers needed


42 Jennifer October 16, 2012 at 4:32 pm

My husband and I are buying a home, agreed on the selling price $279,250. House appraised at 253k. After nearly a month of back and forth trying to get the appraiser to reconsider (realtors were floored by the low appraisal), the seller agreed to come down to the appraised value. Now, I’m told that our original DP of 3.5% will be applied to the house. I was under the impression that the difference in down payment amounts would be returned to us as it is 3.5% on a little more than 22K. Does anyone know anything about this? Are we entitled to the difference or does it become theirs? We were hoping to apply the couple hundred dollar difference toward other closing costs.


43 Elvis November 30, 2012 at 9:37 am

Wow, I am going the very same thing! Unfortunately its not $6k, but about $60k!
Ive been through one lender and now working on another one to see what miracle could get whipped up. Im hoping the first appraisal was a fluke, and the second one will be more towards our advantage. The pro to this is, if, IF the seller agrees to drop the price, but its very unlikely.
Im trusting in God to see what happens!
Good luck to all enduring the same issues.


44 Kim January 11, 2013 at 8:56 am

Hi All,

I am going the same thing. The difference is $30k. After some negotiations, the buyer lowered the price for $10k. I am willing to pay the difference. However, the lender doesn’t agree to sign a contract for the price above the appraisal value even I agree to put down the money more to have my loan being at 80% of the appraisal value – the mortgage is FHA (The broker said that I cannot obtain the conventional mortgage even I put down 20%) . I am thinking of having the contract at the appraisal value and pay the difference outside the contract.
My question is if the transition is legal? and how can I pay for the difference during the transition?

Thank you


Leave a Comment

Previous post:

Next post: