Hi-
Selling home for and have good buyer and everything seemed to going along fine. Home appraised for the same number as the sale price. Buyer put down $16K. Underwriter rejected appraiser number and comes back with number $12K under appraised value. What happens next? Realtor said "let the attorneys battle it out".

That's the problem with the Appraiser always receiving a copy of the P&S before even doing his/her field work. Knowing what the "Magic Number" is has produced these inflated prices that have now put so many people upside down.

Ever since the S&L Banking Crisis of the late 1980s; Appraisers have operated in a realm of psuedo science and given the appearance of applying some kind of rigorous and esoteric formulae to arrive at the FMV which just happens to also support the Contract Price. What a waste ! Anytime I am told what answer to come up with, I can pull together the necessary ingredients to support that conclusion. It's pretty easy !

They should have been operating objectively "in the dark" all along so that their numbers would have been at arms length and they would not have been influenced by the Parties to the Transaction; and ignorant of what was in the P&S. May be we'll get it right the next time around . . . . IF we have another chance !

At least this Underwriter applied some brakes. It should have been done 20 years ago across the board.

I have the same situation here in Tampa Florida. I have a great borrower with 20% down on the mortgage. The mortgage lender is the one lending the money so they make up the rules. Have you looked at all the comparable in the area? Maybe your house is not worth the contract price. Many sellers in this market are still unrealistic about home values.

Thanks. There aren't any real 'comps' in the area to use. I was under impression Buyer had a mortgage commitment form Fannie Mae, so assumed everything was going along as planned. Wish I knew this a month ago, not three weeks before closing.

I am fine if house is not worth contract price, but then why say you are going to buy it at that price? Why not negotiate that at the outset?

No.. This is not good advice.


It is obvious that there "may be" an issue with the sales price in today's market. The loan commitment was surely subject to an appraisal of the property.

You can try to negotiate with that lender. Maybe suggest another appraisal or that they obtain additional comparable sales to support the property value.

or

Switch lenders.

I totally agree that most appraisers see the purchase contract and appraise it right where it needs to be. I also agree that a lender weighs too heavily on AVM especially right now when AVM is misconstrued by Foreclosed property sales.

I don't know anything about New Jersey; but I can't imagine (with over 8 MIllion People) there not being Comps. The Appraiser would have used something drawing from recent Conveyances within a Geographic Radius of 1/2 Mile, or 2 Miles, or 6 Miles and applying a Time Horizon of the past 3 months, 6 months, or maybe even 1 year. There are bound to be more than the few he happened to choose.

You can't blame your Buyer. He probably has a Financing Contingency in the P&S Contract saying that his Purchase is dependednt upon getting Financing for a certain amount. And that "certain amount" is dependent upon the Lending Institution's verifying that the Underlying Asset (your house) is of sufficient value to support their investment. Apparently, they were not convinced.

Perhaps the Underwriter had an AVM (Automated Valuation Model) run to double check the Appraiser's work, and didn't like what he discovered.

I've had these AVMs used, and the results went the other way. Last year, I was sweating whether a place I had scheduled to Close would pass muster in the Appraisal (I thought it was pretty "iffy"). I think the Human Appraiser could have knocked it down $45 or $50 thousand easily, and no one would have been surprised.

I waited and waited for the Appraisal to be scheduled. It never was. (I was the ONLY person with keys to the property, so I should know!)

Finally, Bank of America says the Appraisal was completed and we could schedule the Closing ! How's that ? The Originator says that BOA doesn't bother with Appraisals on "little" loans anymore, just the Jumbos, meaning loans over $417,000; instead they just order a cheap little AVM report to substantiate the Value. I was pleased for my sake. The Seller was a little insulted being called "little". The Property was worth about $285,000 selling for a mere $345,000.

BOA Saved the Buyer a "bundle" by getting just the $39.95 AVM; but they now have an Asset that could be worth less than the amount of the Mortgage. So mucch for being Penny-Wise and Pound-Foolish ! I do not like being associated with these. This story is based upon events of 2007 . . . . Not really that long ago !

Had one like this last year. The property appraised for more than contract but the under writer said the are was declining and would not lend contract amount.

If you are in one of the areas that has been designated as declining the underwriters are scared.

Sometimes it is difficult to explain to a seller that not only do they have to sell to the buyer, but to the appraiser and the mortgage company. It does not do any good to get a contract with a great purchase price if it cannot close.

I have several REO's right now that the sales price 18 months ago was out of line. I know some of these buyer's who think it is the only way to get a proeprty will pay anything. But we are seeing the downside.

I just wish some of this logic had been applied in the past.