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What To Do When Your Appraisal Comes In Short

Mortgage and Lending with ClearPath Mortgage Solutions, Inc. NMLS #1394615 NMLS # 423279

                 What To Do When Your Appraisal Comes In Short

Jamie was referred to me a handful of months ago.  She was afraid that she wouldn't qualify due to her rocky credit history. She had was in the middle of "Credit Consumer Counseling" that was helping her get back on the right track financially.  She had some late mortgage payments in the past and other factors that made her skeptical of being able to obtain financing to purchase a home. 

After pre-approving her, she found a home and applied for an FHA mortgage. Only a few banks will accept a borrower that is in the midst of consumer credit counseling. Most require 12 months to elapse after the counseling was completed. WE chose the lender that best fit her specific scenario.  To her surprise, we received her approval shortly after applying and we were off to the races with getting her loan closer to closing. 

Everything was going very smooth until we hit a brick wall. The home she was purchasing was priced at $230,000 and the home appraised at $186,000. Now this was the first time I had ever seen this happen before (not a home not appraising, but a difference of $44,000 was not the norm). I presented the solutions to the client. They were as follows:
     1. Walk away from the home
     2. See if the seller would negotiate with us
     3. Complete a rebuttal on the appraisal
     4. Make up the different in the price
     5. Try and obtain conventional financing and order a new appraisal

We began with the rebuttal. It took about a week and we provided unused evidence to the appraiser such as new comparable homes that were not used in determining the value.  We were able to get the value changed to $195,000.  Still $35,000 short though.  Then, we began negotiating with the seller and at the same time beginning the process of looking for a lender that would approve conventional financing for a borrower in the middle of credit consumer financing.  We did not inform the seller of our plan B, as we wanted to see if we could negotiate down on the price due to the fact that we weren't in complete disagreement with the appraiser. 

Last night I received the call from the seller (a relocation company) that they would drop their price to meet the appraised value of $195,000. A victory if I don't say so for Jamie. We are aiming to have this loan closed in the next week and a half.

Get creative. Offer solutions. Stay positive and give hope.

"Hope Deferred Makes the Heart Sick" - Proverbs

If you have any appraisal rebuttal questions or want to discuss solving a problem together, feel free to reach out to me.

(Image from blog.thinkbuzan.com)

Posted by

    -Mortgage Consultant for Life


Mike Rankin, NMLS #423279
ClearPath Mortgage Solutions, Inc. NMLS #1394615
950 New Loudon Rd. Suite 231

Latham, NY 12110
Cell:  518-380-4726
Email: mike@clearpathmortgages.com


Mike Rankin does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied.

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Nelson Carrillo
Real Estate eBroker, Inc. - Phone: (619) 940-6560 - Bonita, CA
South San Diego, CA Homes For Sale

Thank you for sharing your post.  We continue to learn new things in this business with every situation that unfolds in our deals.  I've learned a lot this way.  In this case I am sure the Buyer's Agent now knows to use the "unused evidence" next time from the get-go at the point of making the offer to back up the offer price and avoid going through this again at appraisal time!  Good luck!

Jun 02, 2014 12:06 PM
Virtual Realty Consultants
Virtual Realty Consultants LLC - Wellesley, MA
Making the American Dream a Reality

Sounds odd.. Relo companies typically don't price beyond a relocation appraisal for value and even if it was a broker valuation model, the list agent would have had to justify the list price of $230,000.  I can tell you from experience, somebody's head rolled when the corporate client had to eat the difference!

Jun 02, 2014 12:24 PM
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I'd love to know how you got the appraiser to adjust his value. I've never had success with that process.

Jun 02, 2014 03:08 PM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher
I'm so lucky to have my sellers input or homeowners and put that way. I'm only a stager, so that works. More than a stager, but less then one who has this problem
Jun 02, 2014 04:33 PM
Althea Kippes, Esq.
A.T. Kippes, Real Estate Broker - San Francisco, CA
Serving San Francisco to Silicon Valley!

Thanks so much for this information.  This issue is on every buyer's mind, given how fast home prices are increasing in Silicon Valley. 

Jun 02, 2014 04:37 PM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning Mike. A 20% difference in value is a huge difference. Even though the appraiser was willing to make an adjustment to the value, which was great the real problem is that the property was listed much too high and how the selling agent didn't see that was also a bit surprising. You gave excellent advice to your client. Well done!

Jun 02, 2014 07:21 PM
Arlow Real Estate Group in Savannah, Pooler & Richmond Hill
Keller Williams - Richmond Hill, GA

Well done for sticking with it Mike and getting your client the property at a great price!

Jun 02, 2014 08:09 PM
Raul Rodriguez
Covenant Partners Realty - San Antonio, TX
Looking out for the client's interest and not my p

Well done, ultimately the buyer got a better price.

Jun 02, 2014 08:54 PM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

All important steps today when we are seeing so many appraisal issues in current market. Great job!

Jun 02, 2014 08:56 PM
Greg Miller
Ruoff Home Mortgage - Sarasota, FL
Florida Home Loans - Conventional,FHA,USDA,VA

Excellent advice Mike. Kudos to you for not giving up on this obstacle that came up. You served your client well.

Jun 02, 2014 09:06 PM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

Excellent job at helping your client get her new home.

Jun 02, 2014 09:54 PM
ReadySetLoan Team
ReadySetLoan Condo Team LLC - South Windsor, CT
Residential, Commercial & Condo Financing Experts

Excellent story, Mike.  I love that you took the problem-solving approach and showed Jaime how many different options she had at her disposal.  That must have been helpful to her to remain calm when this problem arose.  Great ending!

Jun 02, 2014 10:09 PM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Mike, why would a buyer submit an appraisal rebuttal? Since the second appraisal came in close to the first appraisal, it must have been valued correctly. The time to negotiate was when the initial appraisal came in. Maybe the buyer overpaid by asking for a second appraisal. I'm sure the original price was based on an agent submitting a BPO that was way off.

Jun 02, 2014 11:11 PM
Bruce Kunz
C21 Solid Gold Realty, Brick, NJ, 732-920-2100 - Howell, NJ
REALTOR®, Brick & Howell NJ Homes for Sale

Well Done, Mike!  To "stay positive & give hope" couldn't be a better way to work with clients. Glad you were able to make it work.
Thanks for sharing,

Jun 02, 2014 11:18 PM
Rob Spinosa
US Bank - Larkspur, CA
Mortgage Loan Originator, Marin County

In the buyer's case too, they're using FHA and are protected by the amendatory clause in the vast majority of cases.  If the home doesn't appraise, they can get out of the contract at any time without risk of losing their deposit.

Jun 02, 2014 11:29 PM
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Hey Mike - Good on you!  Every problem contains its on solution(s).  You stayed the course and got the WIN for you and Jamie.  And another kudos for incorporating a quote from Proverbs into your blog:)

Jun 03, 2014 01:37 AM
Marc McMaster
RE/MAX Centre Realty - State College, PA
Putting my clients before myself

Congratulations, that's a huge difference to overcome on an appraisal.  Glad it worked out. 

Jun 03, 2014 02:05 AM
Mike Rankin
ClearPath Mortgage Solutions, Inc. NMLS #1394615 - Albany, NY
Mortgage Consultant

Michael Setunsky – The buyer did not submit the appraisal rebuttal. We (The mortgage company and the realtors) worked together to put a rebuttal together since the realtors did not think the value was substantiated.  There was no second appraisal. The rebuttal allowed the appraiser to review their original value and change it to $195,000.  You are right about the original value being from a BPO that was way off. I agree with the appraiser on this one that the home was over priced.

Tammy – I have had 50/50 success with rebuttals. I find that getting both realtors involved and on board with completing a rebuttal form is key. Together they can find issues with the report such as a home being listed under the wrong condition, wrong style, and even wrong square footage.  It is important to stay factual and unemotional.  We also provided additional comparables that supported a higher value. We are basically doing a ‘sales pitch’ to the appraiser selling them on why they should re-visit their report. Good luck Tammy!

Gen – I completely agree. The Relo Company didn’t do an appraisal to begin with but a BPO that the Relo company accepted.

Nelson – Thank you for your comment.  I unfortunately wasn’t the realtor making the offer on this one but the mortgage consultant. I’m sure the agent learned a valuable lesson from this one.

Olga – I had the same situation happen to me 2 months ago. What I love about being a broker is we took the loan and went to a new bank and I personally paid for the appraisal which came in at the purchase price and we closed 2 weeks later.  Let me know if I can ever help you with this. We do loans in CT as well

Jason – thank you for that!  I love the Proverbs too!

Jun 03, 2014 04:46 AM
Jeff Pearl
RE/MAX Distinctive / LIC in VA - Lovettsville, VA
Full Service Full Time Realtor

Glad it worked out! That seller should have been seriously thinking about dropping the price, and should have come down some.

Jun 03, 2014 05:54 AM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Mike, thanks for the clarification.

Jun 03, 2014 08:17 AM