Buying a home, apprasial came in for less than offer...

[DestinyKnight]

I put in a bid on a Freddie Mac owned home nearly a month ago, got into a multi-offer situation and ended up with the highest bid at 122k, beating out the next highest bidder by $500. In 2007 the home sold for 227K, so I felt comfortable with this price until now. The appraisal came in at 105k, just above what I would be financing a loan for after 15% down. I'm not sure what to do now. I could order another appraisal, walk away, or try to negotiate with freddie mac, but my realtor says I could get into another multi offer situation and lose the house. What would you do?

 

[MagnusTheBrewer]

In general, buying a house at significantly over the appraised value is very foolhardy. Unless, you're in it for the long haul and intend on not moving for a very long time.

 

[JulesMaximus]

Depends on how much you want the house I guess. I'm not surprised that the house didn't appraise. My wife is a realtor and she runs into that all the time.

If the house is in a good area and you can afford it I'd go for it.

 

[spidey07]

I wouldn't overpay for the house which is what you're asking. Not to mention what it will do to financing, the bank may not even do the loan. This happens a lot these days where the appraisal comes in lower and the bank says no.

 

[Rage187]

Meh, it's only $17k. I've lost $90k on my house in the last 5 years. If you like it, go for it.

 

[BoberFett]

Depending on the type of loan, you might have a hard time financing at that kind of LTV.

 

[Mermaidman]

Sounds like you're house shopping. If you haven't already, then you should check out:
http://www.city-data.com/forum/real-estate/

Fatwallet too.

 

[zinfamous]

Meh, it's only $17k. I've lost $90k on my house in the last 5 years. If you like it, go for it.

lol at the new normal.

 

[Gigantopithecus]

Walk away. $17k more than a $105k house is simply too much of an overbid.

Edit: it's not like you'll have trouble finding another house for sale at a good to great price in this market!

 

[AFurryReptile]

I wouldn't overpay for the house which is what you're asking. Not to mention what it will do to financing, the bank may not even do the loan. This happens a lot these days where the appraisal comes in lower and the bank says no.

Pretty much this. Just keep looking. Think of it this way; do you really want to buy a house with the knowledge that, when it sells, you WILL take a loss? 17k is a lot to lose for a house of that price - and there's no guarantee that it would depreciate even even further from that price.

 

[spidey07]

Walk away. $17k more than a $105k house is simply too much of an overbid.

Edit: it's not like you'll have trouble finding another house for sale at a good to great price in this market!

Exactly, that's why the appraisal came in so low. There is simply no sound reason to buy a house that much over appraisal unless it's got 50k worth of everything else sitting inside against comparables.

One can either sit by the sidelines and wait for the bottom, or snatch a hell of a deal. This doesn't sound like of a hell of a deal and in today's market, in most ares, the buyer rules.

Walk away. I've had to discuss this with my wife on the emotional vs. financial aspect. We may really like a house and found one that was great - she loved it, I was "nice, but way too much" so I low balled out the wazoo just to see what would happen. I want the deal of a lifetime because that is what a buyer can get right now. Sellers are getting desperate. Very desperate.

OP - take it for what it's worth, it all depends on the location and what's moving in that area. The appraisal said "not worth it". That should be your first clue.

Home prices are only going down in most areas.

Remember - your real estate agent wants you to buy the house to get the commission, take their advice with a huge grain of salt. Make them work for their money.

 

[OCGuy]

Either get them to match the appraised value, or maybe pay a little over if you really like it. Just realize that your LTV will be based off the appraised value, not purchase price.

 

[JPS35]

Why in the world would you pay more for something that isn't worth the value? If a car is worth $5000, are you going to offer $6000?

Make the offer based on the appraised value and be prepared to walk away if they do not accept it. Surely, there are other houses that are just as good. Use your head, not your heart.

Besides, you are not going to get 100% financing, based on the appraised value, even with the money you are putting in. You would have to come up with even more of a down payment.

 

[Fear No Evil]

Having recently purchased a house I can tell you that the appraisal process is severely f--ked up right now. Appraisers are purposely undervaluing houses. We went from one extreme where they would appraise houses at anything you wanted to now where they are routinely undervaluing them. When I purchased my house the appraiser came in at ~$50,000 less than what we offered. After checking out over 150 homes I can assure you it WAS worth what we were offering. The house we purchased was appraising the same as comparable houses in the area, but they were only taking into account square footage and recent sales or nearby houses.

The house we were purchasing had over $150,000 in renovations (House was basically gutted and rebuilt.) But it was appraising the same as houses which had not been updated since the 1970's. I got pissed at the appraiser and told him if the house I was trying to purchase was worth what he was saying to find me ONE comparable house and he of course could not provide it, but wouldn't budge on the amount.

So those saying just because a house is appraising low it isn't worth what the guy is offering may not be accurate. Appraisers are being pressured by lenders to undervalue houses. If there are multiple people offering to purchase this house for more than its appraising for, obviously the appraiser is WRONG.

 

[Red Squirrel]

I'd ask them to at least lower to the appraised value, or you won't buy it. If they are not in a hurry to sell, they might just decline and hope someone does offer what they want, if they really need to sell, they might just go ahead.

When I bought my house they were asking 190k or so and there was lot of work to do in the house. I managed to get them down to 165k and it turns out it did get appraised around 190k. Right now I'd get well over 200k for it I'm sure. I don't want to appraise it just to find out though, that will also make my taxes go up. At 3k per year, they're high enough.

 

[mwtgg]

Having recently purchased a house I can tell you that the appraisal process is severely f--ked up right now. Appraisers are purposely undervaluing houses. We went from one extreme where they would appraise houses at anything you wanted to now where they are routinely undervaluing them. When I purchased my house the appraiser came in at ~$50,000 less than what we offered. After checking out over 150 homes I can assure you it WAS worth what we were offering. The house we purchased was appraising the same as comparable houses in the area, but they were only taking into account square footage and recent sales or nearby houses.

The house we were purchasing had over $150,000 in renovations (House was basically gutted and rebuilt.) But it was appraising the same as houses which had not been updated since the 1970's. I got pissed at the appraiser and told him if the house I was trying to purchase was worth what he was saying to find me ONE comparable house and he of course could not provide it, but wouldn't budge on the amount.

So those saying just because a house is appraising low it isn't worth what the guy is offering may not be accurate. Appraisers are being pressured by lenders to undervalue houses. If there are multiple people offering to purchase this house for more than its appraising for, obviously the appraiser is WRONG.

So true. Appraisals are a total crapshoot. I'm purchasing a house in the same development as a coworker of mine. He's going through a refi right now and had an appraisal done as well. Mine came in $15k less than his. Our houses are the exact same square footage and layout. However, his house has an extra full bathroom, updated HVAC equipment, is an end unit, has a deck and a finished basement. Frankly, I think those upgrades alone are worth more than $15k extra. His also has a slightly updated kitchen and a few other "nicer" finishes.

It's easy to say, "oh well, it's a buyer's market, low ball. if that doesn't work out, you'll find another house!" Well, every housing market is different. Sure, in general there are plenty of houses out there, but not all markets are equally distressed.

 

[spidey07]

So true. Appraisals are a total crapshoot. I'm purchasing a house in the same development as a coworker of mine. He's going through a refi right now and had an appraisal done as well. Mine came in $15k less than his. Our houses are the exact same square footage and layout. However, his house has an extra full bathroom, updated HVAC equipment, is an end unit, has a deck and a finished basement. Frankly, I think those upgrades alone are worth more than $15k extra. His also has a slightly updated kitchen and a few other "nicer" finishes.

It's easy to say, "oh well, it's a buyer's market, low ball. if that doesn't work out, you'll find another house!" Well, every housing market is different. Sure, in general there are plenty of houses out there, but not all markets are equally distressed.

True

But supply and demand rules here. Have 10 homes lined up to look at this weekend. Steal that property from desparatr sellers.

 

[Doppel]

If the appraisal is in your estimation fair then you don't want this house; it's overpriced. If the appraiser is making sh*t up and you can afford it, then go for it. If you're making an offer and you're smart it means you've been shopping for a while so you know what it is worth. Don't worry about what it sold for in 2007. It could have been $1M. That has no bearing on what it's worth today.

 

[RocksteadyDotNet]

I put in a bid on a Freddie Mac owned home nearly a month ago, got into a multi-offer situation and ended up with the highest bid at 122k, beating out the next highest bidder by $500. In 2007 the home sold for 227K, so I felt comfortable with this price until now. The appraisal came in at 105k, just above what I would be financing a loan for after 15% down. I'm not sure what to do now. I could order another appraisal, walk away, or try to negotiate with freddie mac, but my realtor says I could get into another multi offer situation and lose the house. What would you do?

Where can you buy a house for 100k?! Are you in the middle of nowhere?

 

[Dubb]

Sounds like you're house shopping. If you haven't already, then you should check out:
http://www.city-data.com/forum/real-estate/

Fatwallet too.

Dear God, do not trust a single thing on city-data. The entire place is just flooded with realtors looking to steer people into their current overpriced territory de jur.

there's occasional decent info, but it's drowned in crap.

 

[Leros]

Where can you buy a house for 100k?! Are you in the middle of nowhere?

I'll sell you my closet for $50k.

 

[MoMeanMugs]

Having recently purchased a house I can tell you that the appraisal process is severely f--ked up right now. Appraisers are purposely undervaluing houses. We went from one extreme where they would appraise houses at anything you wanted to now where they are routinely undervaluing them. When I purchased my house the appraiser came in at ~$50,000 less than what we offered. After checking out over 150 homes I can assure you it WAS worth what we were offering. The house we purchased was appraising the same as comparable houses in the area, but they were only taking into account square footage and recent sales or nearby houses.

The house we were purchasing had over $150,000 in renovations (House was basically gutted and rebuilt.) But it was appraising the same as houses which had not been updated since the 1970's. I got pissed at the appraiser and told him if the house I was trying to purchase was worth what he was saying to find me ONE comparable house and he of course could not provide it, but wouldn't budge on the amount.

So those saying just because a house is appraising low it isn't worth what the guy is offering may not be accurate. Appraisers are being pressured by lenders to undervalue houses. If there are multiple people offering to purchase this house for more than its appraising for, obviously the appraiser is WRONG.

What's the purpose of this? Are they just trying to get people into houses?

 

[KillerCharlie]

Yeah you might have a problem with bank financing - isn't that the main reason an appraisal is done before buying in the first place?

 

[HardJim]

My home value was $360,000 in 2007 and I purchased it for $246,000 this year, but the value is still trending down, and nearly everyone is saying that home values will continue to decrease for the next few years, so it may end up with a value of less than $200,000. Do I regret my purchase? NO.

 

[spidey07]

Where can you buy a house for 100k?! Are you in the middle of nowhere?

You can score a 250k house purcased in 2006 for 100k these days easy. Have you not paid attention to home prices?