BiggerPockets

There is nothing you can do to change the appraisal value. Especially since the new HVCC regulations. I don't know what you are trying to accomplish with this deal, but for most situations, the deal is dead when the property underappraises.

Its tough when there are a lot of foreclosures in the area that the appraiser is using as the comps. If you are trying to sell it, a mortgage company is going to require their own appraisal. Hide yours, and don't let a potential buyer know that you had one done. Maybe you will get lucky and a new appraisal will come back higher (if the lender uses a different company, or if they pull different comps).

Originally posted by cucaloco

- Have the buyer bring in the extra cash above appraisal.
- Take a second for the 5k.
- You can challenge review appraisals (if that is what it is), by having your original appraisal submit a reason why the comps are not good representation.

Buyer can walk though...

hi, mr. buyer...the house you are buying isn't worth (according to the appraiser) what you are paying for it so i'm gonna need you to bring extra money to the table.

i'd love to see how that goes!

Originally posted by Josh Green

hi, mr. buyer...the house you are buying isn't worth (according to the appraiser) what you are paying for it so i'm gonna need you to bring extra money to the table.


i'd love to see how that goes!

I've had buyer's do this on the last two deals I've sold. One buyer paid 21,000 over appraised value and another buyer paid 10,000 over. Granted, before I put it in escrow, we had multiple offers and that was one of my contingencies I countered when asking for highest and best.

As a buyer, I would never do it. But if a buyer wants the house bad enough it can work...

An appraisal has absolutely nothing to do the value of a house. It only tells the buyer and seller how much the bank/lender is willing to loan on a house. If the appraisal comes in at $50,000 and the buyer is putting 20% down, $10,000 and borrowing $40,000, what happens above the $50,000 is none of the lenders business. If the buyer comes in with $20,000, the lender is still only going to lend the $40,000. As a matter of fact, the lender likes the higher sales price, it makes their equity position that much stronger. Although they are lending at a 80% to appraisal value, their true Loan to Value is 67% (assuming a $60,000 sales price) Whether the value over the appraisal value is paid with cash, a second or box seats to a Knicks game, the lenders position is unchanged. Someone mentioned the lender might look at the payment on the second, but lets face it, the payment on a $5,000 Second is not much. Amortize it at 7% for 10 years, and the fully amortized payment is only $58.05. Interest only would be $29.17.

Originally posted by Mike M

Whether the value over the appraisal value is paid with cash, a second or box seats to a Knicks game, the lenders position is unchanged.

Box seats at a Knicks game would probably bring the value down now... :lol: sorry had to throw this in, been a knicks fan for years and they have been torturing me since early 2000's

C'mon guys, sounds like you agreed with what I said - but no votes ...

I have been out of the game, so to speak, since the late 1990's as a Realtor. But before that, I was involved with over 5,000 transactions as either the Seller or Buyer representative. Maybe the current lending environment is different, I am going off 20 years ago. But I will go to my grave with the utmost belief that an Appraisal is NEVER the value of the property. How many of us can produce an Appraisal from 2006 or 2007 for a house that would be a complete joke today? Only one entity establishes the value of a piece of property, and her/his name is B-U-Y-E-R. For instance, let's say a SELLER goes and get an appraisal for their house for $100,000 and they list the house for sale with a Broker for $100,000. And it does not sell for a year. Guess what, the house is not worth $100,000, even if the Appraisal said so. Buyers said "NO WAY." An appraisal is used only to establish how much the bank will lend.

Now as to a second trust deed, the bank may consider that part of the debt against the property and the second would need to be done outside and after the sale is complete. You need a lot of trust in your buyer to do that. Again, my last three deals were 2 all cash and another 20 percent down, so I am a bit rusty on how much banks control the transaction. I believe the OP said they would do a second, which works if Seller and Buyer agree.

Did he ever tell us who did the appraisal? Was this your guy, her guy, uncle sam's guy, or the banks guy?

Originally posted by Mike M

...
Now as to a second trust deed, the bank may consider that part of the debt against the property and the second would need to be done outside and after the sale is complete. You need a lot of trust in your buyer to do that. ...

This sounds to me like what has been termed "silent second". Could be construed as mortgage fraud these days. I'm not saying it is definitely fraud, but some people could view it that way.