Appraisal under contract price

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This topic contains 12 replies, has 5 voices, and was last updated by  southflorida 2 months, 1 week ago.

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  • #43947

    southflorida
    Member

    So my biggest fear at this point of the process was that the appraisal would be below the purchase price on my contract and it came about $11K under 🙁
    I already sent an email to my closing coordinator to see what my options are.
    I am buying New Construction, one thing I noticed is that the appraiser included 2 other units in the same community as comparables but he deducted to the value the seller incentives that those units got. I don’t think he should have done that since I am also getting seller incentives.
    Any advice or comment is welcomed.

    #43948

    JHarris981
    Member

    @southflorida I’m sorry to hear that. One thing you can do is put down $11,000 towards the principal. That way you’re only taking out a loan for the appraised amount. I know you’re doing buy down but can’t remember if you’re contributing anything towards principal reduction. If you are then this is one way to bypass this issue.

    #43949

    southflorida
    Member

    I would do that if I could but you can’t do that with NACA. The sales price can’t be more than the appraised value

    #43951

    JHarris981
    Member

    It’s been done before by other members. The bank won’t loan you more than the appraised value but if you’re paying the difference (a down payment/principal reduction) then the bank is still protecting its interest by only loaning you the appraised amount. You may have to get special permission but that’s the way other members have handled it when faced with this situation.

    #43953

    southflorida
    Member

    I am almost sure that’s not possible with NACA, I remember that @ttrumble has indicated in the past that with NACA you can’t pay the difference if the appraisal came for less than the purchase price. I wish it was possible

    #43956

    JHarris981
    Member

    I learned about the possibility of doing this on the forums…wonder if I can find the post. I’d filed it away in my mind in case I ran into that same problem. Maybe something has changed since I saw that post, though… But I’ve read about several things that members are not supposed to be able to do only to find out that there are workarounds and waivers that are given from time to time. I’d definitely recommend trying with as many of the higher-ups as you can before accepting a “no”, particularly if you can prove that the homes in the area you’re moving into continue to appreciate year after year.

    #43967

    dangela21
    Member

    @southflorida check your email I just sent you some information on doing your appraisal dispute. Keep us updated as your situation deals with a new construction and mine was based on a older home. Be persistent and it will work out for you in the end.

    #43973

    I suppose I will share my experience. I did not want to share this previously as I did not want to give any members false hope and possibly kicked off for going against the information @ttrumble put out there. Haha

    My appraisal was $3000 less than the offer. Upset, I knew I had 2 options: dispute the value or ask the sellers to drop the price. I decided to do both. One lovely day I’m on the phone with an AWESOME hand rep trying to waive my repairs and I briefly mentioned, ” I may not even get this house! The appraisal is $3000 below and I’m not sure if the sellers will drop the price”. He was totally shocked and asked me why didn’t my CC get permission for me to pay the amount out of pocket. I explained to him NACA does NOT allow you to cover the amount out of pocket and he corrected me, “they do on a case by case basis and it has to come with high level sign off”. He told me my income looked good, credit, etc. and he would send the request for me! He sent out the request as promised and I was CC’d to the e-mail, but maybe 30 minutes later I got an e-mail from my realtor advising they would drop the price $3000. I don’t know if it would’ve been approved, but I know for a FACT it can be requested. Good luck.

    #43976

    southflorida
    Member

    Thank you @dangela21 for being so kind and sharing your dispute letter, those are the good things about this forum.
    Thank you @searching4homes for sharing your experience.
    Actually yesterday I was feeling down and thinking that because of the appraisal there was no way I was getting this house. However, knowing that I still have options makes me feel better.
    I already drafted, signed and sent the dispute letter to my Closing Coordinator and she already sent it to the lender (By the way, I love my Closing Coordinator, she actually answers the phone LOL), she told me that I would get a response in about 2 weeks. I feel like that I have a good argument in the dispute letter but I assume it all comes down to the discretion of the appraiser or whoever is reviewing the appraisal again. Basically, the appraisal has 6 comparables, 4 of them are sold houses and 2 of them are active listings, out of the 4 sold houses comparables, 2 of them are from the very same community I am buying and 1 of them it’s the very same model that I am buying. Appraisers take the sold price and make adjustments based on how that house would compare to what it’s called the subject property, which is the house that’s being appraised. For the 2 comparables in the same community, the appraiser deducted the seller concessions (Seller contribution or incentives) from the purchase price and the difference was the market value that he assigned, I am basically disputing that the appraisal should only be adjusted for sales concessions to a comparable sale when concessions ended up impacting the final sales price of the comparable but those comparables would have sold at that price with or without sales concessions, I included that giving sales concessions for closing costs is a normal practice when it comes to New Construction properties. Also, I am getting sales concessions, and if the concessions of the Comparable Sales are used to decrease the market value of these Comps, then we would not be having an apples-to-apples comparison which is the whole purpose of using the comparables. At the end I included a chart of the 3 comparables in the same community, the 2 that sold and the one that is an active listing, the chart has the value of the 3 properties without the seller concessions reductions and the average is a value of $1,000 over my contract price.

    I don’t know how strong is my case but at least I am trying and hopefully the appraiser sees what I am seeing and he can increase the value. I will keep you updated and I will appreciate any comment or suggestion.

    #43985

    JHarris981
    Member

    @southflorida it sounds like you are well on your way. Hopefully your letter works and they re-evaluate your appraisal. If not, I’d recommend trying the other option, i.e., appealing to pay the difference out of pocket. As I’d mentioned other members have done this. I understand it’s on a case by case basis but I’m sure you can make a good argument, particularly if that area is consistently appreciating in value. I’ve learned throughout this process that very few things are set in stone with NACA even the things that supposedly NACA never does or allows. I’ve read many times on this forum about things you cannot do, only to personally find a work around and be able to actually do them. That’s why I felt pretty confident about what I was suggesting to you. I’ve appealed to higher-ups, talked to underwriters, etc. At this point I’d have a hard time accepting “no” unless it was from Bruce Marks, since he’s the final word. lol Keep us posted.

    #44011

    TTrumble
    Member

    Hello southflorida,

    Hang in there until the re-appraisal. I suspect things will work themselves out for you.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #44020

    southflorida
    Member

    Thank you @ttrumble your words give me reassurance and that’s a good feeling at this stage of the process

    #44031

    southflorida
    Member

    @ttrumble I got the following lender condition today:

    Lender (8/13/18) – Loan is being recommended for decline: insufficient value. This is a no rehab loan. Sales price is $390,990. The appraised value came in at $380,000. LTV is 102.89%. Maximum LTV for loan program is 100.00%. Please review and advise if loan terms will be restructured. Please advise if there is new information that should be considered by August 22, 2018 or the loan will be declined.

    My Closing coordinator is on vacation until Wednesday but I sent her an e-mail asking her to let the lender know that I am disputing the appraisal, she told me that she sent the letter to the lender on Friday and she said the appraisal dispute process takes about 2 weeks, I don’t know why the lender would send this condition today if my CC sent them the dispute letter on Friday.

    Also, based on the wording of this lender condition, it looks like they are not going to wait until the re-appraisal when the house is finished in December, it looks to me that if the appraisal is confirmed to be under the sales price, they would want to modify the P&S agreement

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