Mortgage Company Appraisal Comes In Low

Q: Our home has been listed for 8 months and we lowered our price a month ago. The day we lowered the price, we received two offers.
 

We accepted the offer of $217,000. The mortgage company’s appraisal came in at $210,000. We were shocked, as our market analysis and several agents stated our price that what we got was obviously what the market would bear.

Our agent has been adamant that we tell the buyer he only has to pay us $210,000. We thought it was the buyer’s responsibility to present us with another offer. What is the proper protocol in this situation?

Also, our agent stated that no one purchases a home over the appraised price. That seems odd to us. Should we drop our price $7K? I believe that because the buyer’s finances are limited, the mortgage company wanted a lower appraisal. What do you think?

A: First, the rising level of foreclosures and defaults is forcing mortgage lenders to be more careful about appraisals and making sure homes are really worth what buyers want to pay. While I do believe that mortgage lenders often encouraged appraisers to come in with a higher appraisal in order to make the deal, I don’t believe they tell appraisers to come in with a lower appraisal because they don’t want to lend the money.

Of course, market forces (meaning you received two offers for $217,000) would seem to indicate that this is what your house is worth. But lenders are nervous these days and want to know that if the borrower stops making payments, the house is really worth the cash they're shelling out in the form of the mortgage.

I think your agent should ask the buyers' agent what the buyers want to do. Perhaps they'll have another $7,000 in cash tucked away that their agent doesn't know about. You might also want to go back to the other buyers and see if they’re prepared to do what it takes (i.e. come up with $7,000 more in cash) to buy the property.

If, however, you want to do this deal, then I think you should take one of several steps: Either lower your price to $210,000, or figure out a way for the buyers to come up with another $7,000. Or, ask the agents to take a bit of a hit on the commission and share the pain.

One last option might be to get a different appraiser to look at the house. There are times that some appraisers can be “tough” on an appraisal but another one might see it differently. A second appraisal might cost several hundred dollars and you can see if the buyer wants to pay for it, split the cost or you can bear the cost.

While it may technically be the buyer’s responsibility to give you another offer, I think if you want to save this deal, you should make a move soon.

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