Lender shared appraisal with seller

10 Replies

In the process of closing on my second property, a duplex in Saint Paul, the appraisal came back with an asterisk related to some basement water issues. The lender won’t close until the seller addresses the issues. So, the lender sent my appraisal to the seller to show the items that needed addressing. I paid for the appraisal, so that’s my property right? I didn’t give permission for it to be shared and now the seller knows the house appraised for a decent amount more than what we agreed to for purchase price. I’m worried the seller might back out now and list again. What should I do?

The seller accepted your offer.  Unless there is language in the Offer To Purchase that empowers the seller to back out if he discovers he underpriced his property (and why would you sign such an offer?) you could sue for specific performance.  And it may not come to that.  The seller may do the right thing and honor the contract.

For your part, since this is a matter upon which your financing depends, the option is there to back out of the deal as long as you have a financing contingency.  You can get your earnest money returned and the seller would have to disclose the water issues to future buyers.  You might mention this should the seller prove difficult.

Definitely express your displeasure to the bank - after you get your money.

If you paid for it, they shouldn't have shared it.  They could have sent the part about what needs to be fixed, with your permission, and not the part about the appraised value.  I agree with Donald that after you close and your financing is in order, I would complain to the bank.

@Donald Robers thanks for the input! I will definitely be relaying my displeasure to the bank. My only concern is if the seller doesn’t wish to address the items called out in the appraisal and what will happen at that point. The lender has stated they won’t close until the items are addressed. But my contract with the seller didn’t include lender required items - maybe a miss on my / my realtors part?

Originally posted by @John Roesler :

In the process of closing on my second property, a duplex in Saint Paul, the appraisal came back with an asterisk related to some basement water issues. The lender won’t close until the seller addresses the issues. So, the lender sent my appraisal to the seller to show the items that needed addressing. I paid for the appraisal, so that’s my property right? I didn’t give permission for it to be shared and now the seller knows the house appraised for a decent amount more than what we agreed to for purchase price. I’m worried the seller might back out now and list again. What should I do?

 The appraiser's client is actually the lender, not you. You are your home inspector's client, should you elect to get a home inspection. No rule or anything was broken here, but as a matter of courtesy you should have probably been given a heads up.

In any case, legalese aside, my response before I read that the appraisal came in high (in addition to the property condition issues): LO should have given you and your Realtor a heads up and / or looped you in. How much back and forth occurred between you and your Realtor is on you, but at the end of the day it's normal for sellers to get a copy of the appraisal when there's property issues called out that need to be fixed. Otherwise, how are they to know that you aren't just making things up to get some free repairs?

My response noting that there were property issues AND the appraisal came in high: LO should have looped you and your Realtor in, without a doubt, and done what you asked. What I do when this comes up is take snips/screenshots of only those portions of the appraisal where something is called out, and send that to your Realtor. Then I also would have sent the full appraisal report to your Realtor in a different email. What actually is sent/forwarded to the other agent, I'd leave to you and your Realtor (who is supposed to consult you, but ultimately act at your direction).

Low appraisals are rare in my experience & with the AMCs I use, but the TLDR SOPs are basically...

  • Low appraisal: send it to the world so you can try to negotiate price down.
  • Appraisal with property issues that's low, or at, value: send it to the world, this stuff needs to be fixed or no one is closing, here's proof.
  • High appraisal, no property condition issues: you keep your lips zipped, it's none of the seller's business. "Appraisal supported value" is all the seller or listing agent need to know.
  • High appraisal + property issues is the only combo where it's a little nuanced how you play it.

Someone could probably turn that into a 2x2 chart. 

That's a bummer that happened and my first thought is to look to work with a different lender. But maybe it's a little late in the game to do that. I would almost set up a conversation between you and your agent and the seller and his/her agent to hash things out. Just see where they're at and if there's anything you can negotiate if needed. 

If your contract has an appraisal contingency and financing contingency, you won’t get the loan unless the seller takes care of the conditions of the appraisal.  If the seller refuses to repair as required by the appraiser, your contract will likely terminate but you have to review your contract to see what it says about all that.

Conditions by an appraiser are not uncommon.

If the appraisal is way high why don’t you just pay for the repairs out of pocket? (We’re Assuming it’s way high as 10% would be easily within the normal margin of error.)

Put yourself in the seller’s shoes. They had plans to walk away with X dollars. 

Imagine you’re selling a car, the guy says I’ll take it. You get excited. Then a couple days later he says I need you to put new tires on the car before I buy it for the agreed upon price. 

Maybe they priced it low because of the problems and the appraisal is correct for a house without those problems. 

Thanks all! I have learned a lot from what has been shared. Especially around the ownership of the appraisal.

As it turns out, it’s going to work out well - the seller is going to complete the repairs.

There are several reasons I don’t plan to work with this particular lender again, communication and timelines being the main ones.

I realize too I overreacted about the sharing of the appraisal. Just my second property and I haven’t experienced all the things yet. I appreciate everyone’s input.

Good to hear it's working out.  It's always stressful when there is a hang up.  4 months into owning my house I found out the title company never filed the paperwork.  I was livid.  They made excuses like the city messed up etc.  The city never received it.  Took another month and having to escalate it up the chain to get it resolved.