Home purchase/sale when appraisal comes in low

[Susie]

lo, it's through a local broker, and the loan will be with HomePoint Financial. We locked it on 3/29; unfortunately rates have risen a little since then. They're currently advertising 3.125%.

[lo]

Apr 23, 2021 10:12:30 GMT -5 Susie said:

lo, it's through a local broker, and the loan will be with HomePoint Financial. We locked it on 3/29; unfortunately rates have risen a little since then. They're currently advertising 3.125%.

That’s exactly what we were quoted, lol. Thanks!

[carrotsmakemefat]

Apr 23, 2021 10:12:30 GMT -5 Susie said:

lo, it's through a local broker, and the loan will be with HomePoint Financial. We locked it on 3/29; unfortunately rates have risen a little since then. They're currently advertising 3.125%.

Any updates on appraisal ?

[Susie]

carrotsmakemefat , no good ones unfortunately.

I talked to our mortgage broker about the issue, and proposed as a comp the house on our new street that sold in Feb 2021 for $412k, since it was not included as a comp in the appraisal and it seemed to me like a no-brainer.  Purchase price is $38k less than ours, but square footage and lot are smaller (0.33 acre to 0.61 acre), and it's a less desirable site than ours because it has back neighbors (we don't).  $412k worked out to $201.96, which is right about our price per sf.

Broker talked to a friend of his who is an appraiser, but wasn't OUR appraiser for advice.  He was not encouraging about appealing the appraisal with that comp.  Couple reasons:

- the comps selected for our appraisal were weird.  Two of three were old (July 2020 sales), and of those two, one was a vastly larger house than ours (3500 sf vs. 2200 sf) on our street, and the other wasn't in our 'hood.  His view was that appraisers generally look at asking price and sale price and try to make it work, and he thought these bizarre comps were his best effort at that, with sales that were available.  That view is supported by the fact that the final number landed in between asking and contract price.
- the $412k purchase price on our proposed comp is really more like $401k because there was an $11k seller's concession, which makes it less strong.  
- our proposed comp sold before print, so there are no photos or info re: interior available to compare with our purchase.
- it had an in-ground pool, which is a + for it relative to our house, which isn't helpful.

Basically he said our proposed comp was not clearly strong enough on its own to materially move the needle on our appraisal, and we could end up moving down depending on which comp he took out.  I was a little bummed by that, but I'm not sure he's wrong.  Even if you count the seller's concession against price, it's still $196.57/sq ft., which is in the right ballpark for us, but OTOH, I agree that it's not a perfect comp and the outcome is not clear.

For now we are planning to just come up with the extra $15k at closing to make up the gap.  Our current house is under contract to sell for more than we anticipated (even if we end up making a seller's concession), so in the end it'll be ok.  In the meantime I have searches set up to monitor sold properties in our area for good comps.  We still have 4 weeks until closing, so if some really $$$ per sf houses sell, maybe we'll reconsider appealing.

Not sure we have any winners yet, but there are a few.

For reference, this is our new house:
4 beds, 2.5 baths, 2200 sf, 0.61 acre, $203.71/sq ft.  Asked $429,900, in contract for $450k.

And these closings have happened since the appraisal was done:

 Originally asked $479,900; dropped to $439,900, ultimately sold for $458,500 ($226.31/sq. ft.).  One neighborhood over, same zip code and schools, closed 4/20/21:  4 beds, 2 baths, 2026 sq. ft., 0.55 acre (but ranches probably aren't direct comps).

 Asked $430k; sold for $455k ($215.84/sq. ft).  2108 sq. ft., 3 beds, 2.5 baths, 0.23 acre.  Same school district, maybe 2-3 miles away, different zip code and neighborhood.  Closed 4/13/21.

Those are both encouraging price wise, but they aren't slam dunks.  One is the wrong house style, the other is the wrong zip code/neighborhood to be really helpful for us.  Inventory is just so low right now that there aren't a lot of closings happening.

I'm looking to see what this one goes for:
 It's in the same 'hood as the ranch, so same zip code and schools as our house.  It's smaller, only 1614 sf and 3 beds, 1.5 baths, but is pending after multiple offers at $310k.  IDK what the winning bid was, but I wouldn't be surprised if it's as high as $350k.  At $350k, it would be $216.85/sq. ft.  Even at asking price it's $192.07/sq. ft, and I know it went for more than that.

There are a couple more 4-5 bedroom, 2.5 bath homes in our school district set to close in May.  I guess we'll wait and see what those final prices look like too.

[carrotsmakemefat]

The house is gorgeous !

We may have to come a little out of pocket for our house too but it’s under our budget and we have SOME cash to play with. I’m crossing fingers for our appraisal on the new house. We went 50k over ask and we’ve seen as high as 120k over ask on houses around it

[carrotsmakemefat]

Susie any final updates ?
My appraisal came back and I was shocked that it appraised over. My REA was convinced we’d need 20k extra to close

[Susie]

carrotsmakemefat , congrats on yours coming back good!  I swear this process has taken years off my life.  It has been so frustrating.

Thursday night I was flipping through the appraisal report, and noticed that there were comps #1-3 all listed on page 3, but if you keep turning through other pages of the report, there's a random comp #4 listed separately on page 8.  Comp #4 was the gray ranch I mentioned in a post above, and the "sale price" listed in our appraisal report was the asking price of $439,900.  So I checked with my agent to make sure there weren't any weird seller concessions or anything (none), and on Friday I called my mortgage broker.  I wanted them to update the appraisal to reflect the actual sale price ($458,500) of comp #4, instead of using list price as sale price (with no adjustment for the fact that it's only a list price).  My hope was that this would narrow the gap a bit, since it's very recent, geographically very near, and right in our price zone.

After a lot of wasted hours and back and forth calls, the bottom line is that we are basically stuck with the $15k short appraisal.  The appraiser will not update the appraisal done 4/8 to include a sale price that closed on 4/20, even though it's the same property and it was in contract for that price as of 4/8.  The list price as sale price stands.  That is bullshit, nothing sells for list price right now!  At minimum there should be some market adjustment factor!  But we're stuck with it.

So I asked if we could redo the appraisal, so that we could include April/1st week of May closing data.  It would cost another $475, but might be worth it to us.  Answer was no, not allowed.  1 house, 1 loan, 1 appraisal.  No do-overs allowed.  Seriously?  

Literally the only option available to us to fix this is to start over with a new lender, who would let us start from scratch with a new appraisal.  

I wish I'd known all this much earlier in the process.  At this point we are supposed to close in 15 days, have flooring on order, have a schedule to keep, and a sale that's based on that timeline.  Starting over is a really unappealing option at this phase.  Plus, our current lender was willing to waive escrow even with <20% down, and no other lender would do that.  Funding an escrow account with another lender would negate a bunch of the upfront cash savings even if it appraised for full contract price the 2nd time (which is a gamble).  It's totally not worth it all the stress.

We've decided to just stay the course, and I'm trying very hard to just let it go.  The appraisal is not a good reflection of the present market value of our house, but it's just a tool for getting through the financing process.  We have the cash, we can do it, it'll be ok.  This is just a matter of how we finance the purchase, not the purchase price itself.  In addition to the $15k at closing it means we'll have to spend a little more cash after we sell our old house to pay down to 78% LTV to remove PMI, which is also annoying, but then the loan will be smaller when we recast.

My big hope is that since our buyers will have their appraisal done a month later than we did, they'll benefit (and so will we) from the market supporting higher appraisals.  That appraisal will affect our bottom line more directly, since they're VA 100% financing.

[carrotsmakemefat]

Ugh sorry to hear that !!! We were worried because a couple of homes on the same street were sold to family members at the list price. The comps around it I guess still supported but I was surprised.
I’m glad you’re moving on and getting into the house you want ! We close in 10 business days and I’m so nervous !