Ask a real estate pro: What happens when the appraisal comes in too low?

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Q: I am in the process of buying a new home on Miami Beach. But the bank is telling me that the appraisal came in $200,000 less than the purchase price. The bank will lend only off its appraised value and not what I am paying. The house is clearly superior to the comparables the bank used, so I don't understand why the value came in so low. What should I do? -- Stanton

A: Stanton, this is something we come across more than people would imagine. Right now, especially in the high end market, values seem to be all over the place. Also, considering that an appraisal is an "opinion" of value, different appraisers often can have different opinions. I would suggest that you approach your bank and request a second appraisal and if need be, a third appraisal. If all three are below your purchase price, then most likely you are overpaying for the home. If that's the case, I would suggest approaching the seller and presenting the appraisals in an effort to renegotiate.

Q: A friend of mine told me that President Obama came out with a program to modify second mortgages. My payment has nearly doubled on my second loan so I wanted to see if I would qualify. - Marie

A: Marie, nearly a year after the Obama administration announced a plan to help up to 1.5 million struggling homeowners modify their second mortgages, not a single homeowner has gotten any assistance. The program has been completely ineffective. It was part of the administration's $75 billion anti-foreclosure initiative, which was supposed to induce mortgage servicers to coordinate payment reductions on additional mortgages when the first mortgage is modified under the administration's Home Affordable Modification Program.

Q: I am an elderly woman who just turned 90 and would like to see if I can do better than the 7 percent interest I am paying on my current mortgage. - Bethel

A: Bethel, not only can you do better, but you may even qualify for best execution pricing, which is currently below 5 percent. In addition to considering a new forward mortgage, you may also want to consider a reverse mortgage. The government has really strengthened its reverse mortgage program. Interest rates are extremely low and no monthly mortgage payments are required. Since your situation is somewhat unique, I would suggest contacting a licensed mortgage banker to review your situation in detail.

Q: I am in the processing of refinancing my home, but my bank is telling me that it is cross collateralized with a commercial property and that my request has been declined. The commercial property was sold over a year ago, so I don't understand how this can be possible. -- Randy

A: Randy, what most likely what happened is the bank never released the additional collateral when you sold your commercial property. I would suggest that you forward your current lender a copy of your closing statement for the commercial property and request that the lender write down your loan balance to reflect just what you owe on your home. Once this is resolved, you should be able to go back to your lender and show that there is no additional attachment, which should allow the lender to originate a new loan as long as all other aspects qualify.

Source: http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2010/03/ask_a_real_estate_professional_14.html

Louis Spagnuolo of WCS Lending in Boca Raton