I previously posted how my wife and I found this great little starter home. I was so excited. Things were falling into place.
Well, I’m the poster boy for counting unhatched eggs. I paid $350 for an FHA appraisal (a necessity). This appraiser decided the home was $5,000 less than the agreed-upon purchase price. The bank won’t lend for anything over the appraiser’s price. That means, either the seller must come down $5,000, or we have to come up with $5,000, or a combination of both to close the deal. The other option, which is pretty likely at this point, is the deal is null and void.
The thing about an FHA appraisal is that it sticks on a home for 6 months. But the sellers can just sell the home through a conventional loan, which I’m told has less stringent appraisals. And they’ll probably get the amount we offered.
The bottom line is that the Realtors involved, my wife and I, and the sellers all feel this home is worth much more than a professional appraiser. And I’m out about $600 if we don’t get the home, if you count the cost of the appraisal and the inspection we had done. And we won’t have our home.
We were supposed to move in on June 23. We were so excited. It’s a bummer.
When I bought my house I went through a VA loan, which is more stringent than an FHA or conventional. The wife and I were so worried that the same thing might happen to us. Luckily it didn’t. Buying a house is a PITA. I hope everything works out for you.
Yeah, it is a PITA. The thing is, Amp is that my wife and I made the mistake of thinking finding a home would be kind of fun. It stopped being fun as soon as we lost our first bid. We’ve been turned down on a total of four bids, and one of them after we were 15 minutes from sending a counter bid (someone overshot the asking price, we think).
We found this home right after that incident in which the counter offer wasn’t even accepted. We’ve been dreaming about the house for weeks.
It’s a seller’s market in the price range we’re seeking, which is why we put a good bid on the house we’re trying to buy. If we had bid the appraiser’s price, we wouldn’t even have gotten this far.
Well, you might be able to work something out. Sometimes you can talk the realtors into chipping in one or two percent from their commissions in order to make the sale.
Can you appeal the appraisal? I’m not sure where you are, but here in the Boston area, 5K is a such a ridiculously small fraction of the house’s price that I can’t imagine not being able to close the gap.
I am a commercial real estate agent. I am not a residential specialist but there are a few options you have in real world terms if you really want to make the deal happen depending on how anxious you, the Realtors and the seller is to cut a deal.
$ 5000 to absorb into the deal
You didn’t mention the price of the house but you might be able to get the Realtors to come a bit off the commissions in order to get the deal done quickly to the tune of (let’s say) 500 or 750 each which will help ( the seller) pick up 1,000 to 1,500. against the 5000 differential. Just tell them point blank this is the only way you can get the deal done and if they want the deal to close this is the only way. Business is business. Commissions are completely negotiable within reason. There is a point at which it doesn’t make sense to do business re adjusting commissions. If you really want this house you need to find that balance point. All they can say is no or counter-offer.
3,500 left - Have the seller carry the 3,500 difference
(or whatever the balance is) as a 3 or 5 year balloon note at a somewhat above market interest rate based on a 15-20 year term (to keeps payments reasonable). At the end of 3 or 5 years pay off the note to seller directly or by refinancing the house and loading the note into the new mortgage.
3 or 5 year balloon notes
3500 @ 9% with 20 year term / 31 per month
4000 @ 9% with 20 year term / 36 per month
5000 @ 9% with 20 year term / $ 45 per month
I was told by our loan officer that there’s three ways this can be worked out:
The seller comes down in price.
We make up the extra money out of pocket.
Null and void the contract.
Or a combo of 1 and 2.
My real estate agent used the term “death blow” twice after finding out about the appraisal. It’s an $88,000 home, so $5K is a lot to make up when the sellers could probably get the price they want through a conventional loan.
Now, I never thought of asking the Realtors involved to come down on their percentages. It’s a possibility, I guess. At this point, I’ve learned that the listing agent has given some more comparatives to the appraiser, who has said he will reconsider his appraisal but also mentioned his 19 years of experience and considerable expertise. My Realtor said appraisers are like umpires. They don’t often change their calls.
We’re hopeful the sellers will play ball on this no matter what happens, but we’re preparing ourselves for disappointment. One hope is that the sellers have a deal lined up contingent on the sale of their home. This might discourage them from putting the kibosh on the deal altogether. Even if they came down some, they’d still have more than $30K equity in five years’ time, which will tell you something about the market right now in our county (St. Louis suburb) and the quality of the neighborhood we’re buying into.
Another problem is we have $2,500 in closing costs written in, and we’d have to come up with that money most likely in the next few days. Hello, Wife’s Aunt? You have lots of money, can you give some of it to us?
Wow, our situation wasn’t nearly the same. We lost a house and lost $600. But, you had an enemy with a name and a face and everything. Kharma will get Ms. Kierney, don’t you worry. Me? I can’t get too mad at the appraiser. He did his best, I guess, even if it screwed us over good. Like you, we will find something even better. I’m glad our real estate laws are better than that.