It Used to be the Inspections that Ruined the Deal - Now It's the Appraisal!

By
Real Estate Broker/Owner with David Wain Realty, LLC

 

My Last Two Deals Die with the Appraisal

Note: This is not meant as a slam to the appraisers out there. I know you're under intense scrutiny and in good times and bad, you're job is always challenging.

Is it just bad luck or is this going to be a trend? I did all the comps for a recent contract I wrote for my buyers and based on that we made an offer to the seller. No magic there, just due diligence. The offer is accepted and it's starts the ball rolling towards closing. The buyer does all his inspections, gets the contract to lender, title agent and insurance agent. He gets a really great rate and the lender is happy with this deal.

Well, the step I usually welcome because it signals that things are going well has now become when I hold my breath these days. I know my market area inside and out. I know when an offer is too low or too high for the most part. What I can't figure out is where some of these appraisers get their comps. We have a problem in Fort Lauderdale where many of the appraisers come from the Miami-Dade area. Some are just not so familiar with this area. The neighborhood lines are very nuanced and if you don't realize that, it can result in poorly chosen comps. The sale was not a short sale or a foreclosure but two of the comps were foreclosures from over a mile away from the subject property. There were a few very similar homes with recent sales just a few streets away in the same neighborhood. I always make sure to get a copy of the contract to the appraiser for reference. I also have comps at the ready, some appraisers appreciate it and some refuse. Either way is fine with me.

The appraisal naturally came in well under the agreed upon price the buyer and seller negotiated and the buyer says he doesn't want the property if he has to make up the difference to the lender to get the loan - he was already putting 25% down.  As was his right specified in the contract, he walked. Although I had proved to the buyer that the price was fair, he worried about being under-water as soon as he owned the property.

The property went under contract a week later and sold for a higher price than our contracted price. Happy for the seller, not so much for my buyer since he lost out on a house he really wanted.

Is this happening to anyone else more than before?

All comments are welcome...

Comments (6)

Jay Schmitt
Keller Williams Keystone Realty - Gettysburg, PA
Gettysburg Real Estate Agent

Sorry to say I have already lost one this year do to an Ahole appraiser. Tried reasoning with him but only he could be correct.

Jul 18, 2010 03:11 AM
Sissy Thomas
Keller Williams Realty - Hendersonville, TN

Brian,

Thanks for your post on this topic.  I've often thought that our current appraisal system is antiquated.  Most appraisers are quite good.  But, there is absolutely NO check and balance system to deal with wonky appriasals.  We should be able to provide solid comps to challenge these appraisals.  There needs to be an accountibility system for appraisers.  The only thing to do here is to send a written complaint to the lender, who then MAY pull the out of the "pool" (at least that's what they call it in this area).  In any event, the deal is blown for the buyer.

It's nuts being left to the "luck of the draw"!

Jul 18, 2010 03:15 AM
Indera Coggins
Re/Max 100 - Dunkirk, MD

Brian, I am getting nervous when I read and hear of appraisal stunts. I haven't had any this year that was aweful. However, I am sure I will soon encounter a speed bump with appraiser. Keeping my fingers crossed.

Jul 18, 2010 03:16 AM
Tricia Pearson
Tricia Pearson - Pearson Real Estate - Texas Hill Country - Boerne, TX
Real Estate Broker, San Antonio/Hill Country Homes for Sale

I feel your pain. A local appraiser just used a non-distressed comp 20 miles away and "forgot" to use the recently sold short sale just 4 houses down the road.  The deal is sunk.

Jul 18, 2010 03:19 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

This is such a common incident!    Many times the appraiser/appraisal will kill the deal.   It USED to be the inspection....

Jul 18, 2010 03:53 AM
Doug Rogers
Bayou Properties - Alexandria, LA
Your Alexandria Louisiana Agent

I have had three deals this year come back with mandated repairs. Most were painfully stupid and had little bearing on the value of the home. Just one more layer to the onion!

Jul 18, 2010 01:14 PM