Appraisal value WAY below accepted offer by $40k

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Appraisal value WAY below accepted offer by $40k

Mo Muigai
Rental Property Investor · Minneapolis, MN · Member since 2019 · 85 posts · 22 votes

How do I handle it? Accepted price $40k over appraisal value, was to close in a week. What do I do?

This is a personal residence property to house hack...

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y

First ask for reduction in price...if they say no....

then contest the appraisal....this usually fails...

then switch lenders and get a new appraisal.

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  • Alexandre Marques dos Santos
    Rental Property Investor · Member since 2020 · 215 posts · 137 votes
    6y

    @Mo Muigai

    Appraisal should have no impact on your sale. Sell it and let the guy pay lower taxes...

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y

    First ask for reduction in price...if they say no....

    then contest the appraisal....this usually fails...

    then switch lenders and get a new appraisal.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    2Reply
  • Mo Muigai
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2019 · 85 posts · 22 votes
    6y

    @Alexandre Marques dos Santos

    I’m the one buying! Wish I was the seller...

    0Reply
  • Mo Muigai
    OP
    Rental Property Investor · Minneapolis, MN · Member since 2019 · 85 posts · 22 votes
    6y

    @Russell Brazil

    I will try that, if they agree to wait on closing dates, otherwise they were ready to go! And so was I!!

    Thanks Sir

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  • Alexandre Marques dos Santos
    Rental Property Investor · Member since 2020 · 215 posts · 137 votes
    6y

    @Mo Muigai

    Ops my bad...

    Then you have limited options.

    1) dispute appraisal. Its hardly ever changed

    2) If you are financing AND can put a bit more cash to cover for the appraisal difference AND is very comfortable with the numbers ( including the value you are paying) go for it

    3) if you are not comfortable, then you have a nice excuse to walk away.

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  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y

    Depends on if you're a buyer/seller and if you READ AND UNDERSTOOD THE PSA.  An appraisal usually matters most to lenders.

    If the PSA has a clause like "property must meet or beat appraisal" or "contingent on financing rate/terms acceptable to buyer" then you may have an out.

    If not and you've got a p***-poor buyer broker, then if you want out, the E/M (again READ THE PSA) may be in jeopardy of being surrendered if the buyer walks.  OTOH, if buyer doesn't walk he may want a price drop or put in more down.

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  • Sean Tagge
    Investor · Lehi, UT · Member since 2015 · 435 posts · 300 votes
    6y

    OPTIONS: 

    If you are not super motivated to buy it: My sister had this same issue $30k appraisal under sale price. The seller needed to close quick because they had a 1031 lined up so she held firm and stated she is not buying anything over the appraisal price and the seller accepted to sell at the lower appraised price. 

    If you are kind of motivated to buy it: This might be a good opportunity to renegotiate with the seller. Ask the seller to meet you half way of the appraisal and sale price.

    If you are desperate to buy it: contest the appraisal (usually never works), then get a new lender and you can get it reappraised. or just fork over an extra $40k on top of your down payment. 

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  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    6y
    Originally posted by @Mo Muigai:

    @Russell Brazil

    I will try that, if they agree to wait on closing dates, otherwise they were ready to go! And so was I!!

    Thanks Sir

    Russell is right, of course.  Seller reduces ask or have to get a new lender and hope the new appraiser allows you to overpay $40k (as value investors everywhere look skyward shaking their heads)

    What's the purchase price, Mo? $40k on what?  

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