The Appraisal Came Back Too High - Sorry, There's Going to be a Delay in Closing Your Short Sale?! (UPDATED)
The pendulum has definitely swung. A few short years ago, a borrower could sign his name for a million dollar loan without having to provide proof of his income or his assets.
Today, even a borrower who has good income and a lot of money for a down payment can find it difficult to obtain a loan without jumping through many hoops.
Rules keep changing. A year ago, HVCC was enacted which prevents buyers, their agents or their lender from choosing the appraiser. The purpose of this is to preven an appraiser from being unduly influenced in valuing the property. However, it results in other issues.
In this case, there were two appraisals done. The first came in more than 20% higher than the purchase price. I thought, great, this is going to be no problem. But, then I was informed that the appraisal was too high, and we needed another appraisal?!
WHAT!!?? I've been around this industry since I was in single digits, and I've never heard anything like this. It turns out that we needed another appraisal because the first appraisal was over $1,000,000 even though the purchase price wasn't. So, we got a second appraisal, which also came in over $1,000,000. Now we needed an appraisal review.
The reviewer came in and cut the lower appraisal by over 22%. Now, I really had a problem, because it was significantly below purchase price.
This was a short sale, and we were running out of time to get things done.
What do we do now?? I needed to find a solution. So, I did something I had never had to do before when we could speak with our appraisers. I wrote an appraisal rebuttal explaining things the appraiser didn't know that effected value. Things I would have been able to discuss if we'd been able to talk.
The result? The appraisal review was increased to just over purchase price, and we were able to close with a significant delay.
So, it's a happy ending. The buyer is in a new home and is ecstatic. The seller avoided foreclosure and can move on from here with nothing hanging over their head any longer.
Are you facing foreclosure? Do you know what your options are? Would you like to discuss them? Please contact me at 714.319.9751
UPDATE - From the comments, it looks like some think the appraisa in question was the BPO (Broker Price Opinion) for the seller's sender. The appraisals in question were done by the buyer's lenders.