My spouse is selling her house which we listed for $185k. Within 2 days, we had 5 offers over asking, and went under contract for $202k. A couple things came up in the inspection, and we spent 11k in repairs which our realtor told us to get done before selling.
Now the appraisal came back today at 175k. Buyer can’t close the gap, what do we do now? Should we relist the house even though the appraisal was so low?
Appraisal came back much lower than contract price (seller)
byu/epetty25 inRealEstate
Posted by epetty25
12 Comments
Why do you think it would appraise for more next time?
What about the other 4 buyers?
Have your agent reach out To the other offers.
Meet the client 1/2 way
Relist …
Listed for $185. Appraisal came back at $175.
It’s not going to appraise much higher. So I would think you would need to relist knowing this or find a buyer that can cover a gap.
Were the repairs you made done before or after the appraisal? What were the repairs you made?
If they were before, you might ask for an updated appraisal value if you made a lot of repairs. The buyer (or you) will have to pay the appraiser to do a second trip, but if the appraiser noticed those problems before, it might be as simple as them verifying you made those fixes. It also might get you closer, if you’re only $5K apart after an updated appraisal, are you willing to meet the buyer in the middle, vs going back on the market and taking the chance this might happen again? I probably would see if we can meet in the middle.
Or go back on the market and pick a buyer with a bigger down payment.
Are there are many offers? Any that CAN close the gap? I would relist…but big question, what did it come back so low? What was the reasoning behinds it? Were you there when they appraised it? I’m always there and am nice, friendly, bake them cookies, drinks, whatever they want. I want that appraised high and it’s literally 1 person who has the control. If they had a bad day…there’s your $10k. :(. Sorry, this sucks.
There’s a few options:
1. Buyers agent can submit a rebuttal and provide their own comparable sales to try to change the appraisers mind.
2. The buyer can get a new lender and therefore a new appraisal
3. Buyer and seller can come to an agreement to cover the gap
4. Go back on market and hope the next round is different
Are you sure you want to take the chance of additional issues arising, or potentially facing the same issue again (or worse) during the next transaction?
You could attempt to renegotiate with the current buyer by establishing a maximum out of pocket $ amount for any repairs, concessions, appraisal gap, or other negotiated items.
AND/OR
Is the current buyer willing to challenge the appraisal?
If yes, your agent can assist by gathering additional comparable sales used when originally pricing the property, while also updating the analysis to ensure newer comparable sales have not trended lower since the home was listed. The buyer can then request that their lender pursue a Reconsideration of Value (ROV).
If no, quickly determine your best course of action and move decisively.
At that point, you essentially have two options:
Sell to the current buyer, minimize further risk and expense, and get the transaction closed.
OR
Have your agent immediately reconnect with previously interested parties to determine whether there is renewed interest and whether any buyer would be willing to include appraisal gap coverage. It may be a stretch, but it is worth exploring.
If there is no traction, adjust the price accordingly and get the property back on the market as quickly as possible.
This happened to us about a year ago. It sucked. And frankly, there’s not a lot to be done on your side…it’s the buyer’s who gotta do the work but you may be able to help. You (well the buyer, since they’re the bank’s client not you) can file a reconsideration of value, but they’ll need some supporting evidence about why your house should be appraised differently beyond ‘well, the buyers want to pay more than you think it’s worth’. Provide details about the renovations such as permits, receipts of the work done if the repairs are such that they’re a significant upgrade (i.e. a kitchen went from builder’s grade to lux, new roof, etc). However, if it’s just some cosmetic work, it’s unlikely to move the needle as the appraisal is more focused on verifying the square footage, number and type of rooms listed and general condition of the house rather than “are the floors vinyl or laminate”.
This happens. Sometimes it’s the appraiser. I have a feeling banks are starting to tighten appraisals largely so they’re not left with a bunch of underwater loans.
You can relist, but there’s a likelihood it gets re-appraised for the same amount especially if future buyers use the same lender. Depending on your contract, the buyers could try to find a different lender but that may lengthen the time your house is under contract with no guarantee the 2nd appraisal comes back better…it may, maybe not).
For us, the buyers dragged their feet but also had some life changing events so we all walked away from the agreement and relisted. We found a buyer in about a week or so and thankfully they used a different lender and the appraisal came back favorable, but that 2nd appraisal was stressful!
If you have five serious offers over asking, and you told the appraiser this, and they came back $27k short, I’d report them.
– An Appraiser
So a couple of things. And these are lessons learned. Don’t do any repairs on behalf of a buyers inspection unless the buyer agrees to move forward. I never advise sellers to make any repairs unless absolutely necessary for the buyers financing. Otherwise give a credit. The other thing is if you’re going to make repairs or give a credit, don’t do it unless the buyer removes their contingencies. So it’s all hindsight at this point. My suggestion would be go back on the market and get a different buyer.
lowkey one of the more practical takes i’ve read on this topic in a while.