BiggerPockets

The agents have a very limited ability to influence the appraisal. The real problem is that appraisers seem to use the purchase price as the max they will appraise a property for, while looking for any reason to bring it lower.

$2,000 doesn't sound worth losing a deal over. Drop the purchase price and sell!

Huh? It sounds like the buyer is jerking you around. If they thought the house was a good deal at, let's say, $50,000, and the appraiser says it's only worth $48,000, why is it not a good or better deal at $48k? Was the buyer hoping it would appraise for $10,000 more than he was offering? Yeah, right.

Congrats for only getting dinged by 2k. I've had a few that were much worse this year. I would pull my own comps to show them that they are getting a deal. Explain to them that appraisers are scared out of their pants and always opt low in this environment. Do whatever you can to save the deal! In the mean time, read up on J Scott's article about how to approach appraisals. It will help you in your future deals.

I would sell at the lower price as well, and go on to the next deal

Thanks James, I agree, but they have been playing us like a puppet. Gotta make a firm decision soon..btw, I would take the lower offer, but they said they just want to back out now..not sure if it's their negotiating tactic or not, but I'm just sick of it already..

I wouldn't want to lose a buyer but I also wouldnt want to play too many games. Match the appraisal and tell them that's your best and final. If they walk, find another buyer and stick with your number. If your in a good area and the house is priced right it; will sell soon.

A big determining factor will be whether it's an FHA loan and whether you signed the standard FHA addendum to the contract.

In my state, the standard FHA addendum used to say that the seller had the option to lower the price to appraised value (giving the seller the leverage to make the decision), but the 2011 version of the form gives the buyer to back out if an agreement can't be negotiated (giving the leverage to the buyer).

I'm not sure if the language in that addendum is uniform across all states or not, but if this is an FHA loan, you'll probably want to read the FHA addendum you signed (assuming you signed one).

I feel your pain. Beliwve me, been there done that: http://www.biggerpockets.com/topics/62398-appraisal-issues-on-house-i-am-flipping?forum_id=67&page=1

But like everyone else says I agree you need to explain to them the idiotic appraisal worlsd we are living in. Not only do you wanto to inmediately take the $2,000 deduction but you want to throw something in there as a show of good faith, maybe a washer/dryer or the like.

You first need to start with their agent and explain to them why the appraisal is what it is and why it really does not matter.

A $2k drop in price is really nothing. Much better than having the house go back in the market and then possibly get hit with an even lower appraisal. Although if the next contract comes within the next 6 months and is also and FHA loan you might be able to use this appraisal.

Greg,
As others stated, read your purchase contract so you know what your rights are and where you stand.

Secondly, the advice of find another buyer and not waste your time may not be the best advice. While it is a common emotional reaction to a buyer like this, you must consider the costs of starting over again.

First and foremost, if you have the right via contract to reduce down to appraisal price, then you simple inform your buyer they have no more contingencies to back out and you will sue them for damages for not closing.
If you don't have that option, you will want to stay on the nice side and explain to them what I mentioned before regarding appraisals, that you will come down to that price, and that the costs for them (appraisal, inspection fees,time, etc) to move to another potential purchase may waste all the savings they think they are missing. Then, if all that does not work, you have to consier what the costs are for you to start over, how difficult it is in your market to find a buyer for this property, and weigh that against giving this buyer something else in addition to the $2k reduction.

I would make sure to verify with their lender that it is okay for you to pay for their inspection. Especially if this is an FHA loan, there may be some restrictions on sellers paying for the buyer's inspection.