Appraisal came in too high and closing is next week. (sales, mortgage)

[isabella20948]

Help!! I don't know what to do. Signed a contract April 2008 with a builder. Incentive was to go with builders lender and get closing costs paid. Sounds great!! Appraisal was done last week and came in $5000 higher than purchase price. After much research found out the comps that were used were l. A model home that closed back in August, and all the upgrades in that model were not deducted... another comp that was used was a house that closed in June 2008, another comp was my neighbors house who put tons of upgrades in and all of those upgrades were not deducted only some of them. My closing is next week. From the homework I've done the appraisal is $35K over where is should be for the house we built and the few upgrades we could afford. THe contract I signed is non-contigent so I can't walk away without being sued for specific performance. In the meantime other homes in the area are 40-45K less than mine and bigger with tons of upgrades. I feel I made a big mistake and now can't get out of it... I can get my own appraisal but the lender won't honor it. I sent a package to the lender with all my concerns and they are sending it to the appraisal company to have them review it. Any advice? Really appreciate anyone's input. Thank you Isabella

[kdog]

Originally Posted by isabella20948

Appraisal was done last week and came in $5000 higher than purchase price.

What specifically is the problem? Most people are ecstatic when their appraisals come in higher than the purchase price because it means you're buying the house under market. They're not trying to raise the purchase price of the house to match the appraisal, are they?

[Luke9686]

I agree with K... What exactly is the problem?? If you signed a contract with the builder for x amount, then you are purchasing the house for x amount, regardless of the appraisal. Are you buying a lender owned?

[sh9730]

Sounds like the OP is actually BUMMED that it came in higher than the they wanted because now they have to go through with the contract even though they are not happy with their decision of an offer price they made back in April since they feel prices have come down. Basically, buyers remorse and they were hoping the appraisal would get them off the hook!

SO, they are saying the lenders "independent" appraisal came in too high and is trying to get it adjusted so they can back out of the contract without penalty.

[kdog]

I see. Well, that's easy. Get another lender, pronto. There should be no obligation to take the lender's deal until you sign on the line. Delay the closing if necessary. We hear of builders reducing the price to close all the time around here. Threaten to take them to court. In this sub-prime mortgage economy with lenders going to jail, I say call their bluff.

[isabella20948]

Not exactly. All the houses in the area have lost value. The appraisal that was done favors the builder. I still want the house but feel the appraisal is too high for the few upgrades that we put in. Houses in the area have sold in the low 200's with built in pools upgraded everything. My house has all standard stuff except for a real nice "view" and was appraised for $285K. I feel once I sign on the dotted line I will be "upside down"...The woman down the street lives out of the country, built her house with tons of upgrades and paid $360ish and closed a month ago. A month before that the same exact house sold for $240K, When my appraisal was done the comp used was for the $360K house and the $240K was never mentioned. So I feel that my appraisal isn't exactly up and above board....

[Rick Lee]

I'm not getting this. How can you be upside down when you're getting instant equity, even if you put nothing down, the second you close?

[Ponderosa]

For what it's worth, those upgrades (particularly if purchased from the builder) return only a small fraction of what they cost. So you can't say that if someone spent 40K on upgrades, that their house should be 40K higher - maybe 10K. Location, things like a big yard and a view have more impact on value than plantation shutters.

Anyhow, you can ask for an appraisal review like you have. When it comes back the same - which it will - then you have to decide whether to leave your deposit on the table or go forward. I guess it comes down to which way you lose less money, though losing a cash deposit is a more bitter pill IMO than not hitting the bottom price when purchasing an appreciating asset (or a family home). Think long term. There are not a lot of options here.

[isabella20948]

So now to make matters worse, I found out that the lender owns the appraisal company. Now I really think the appraisal is really slanted towards the builder.

The builder gives an incentive of "paid closing costs" to the buyer if they go with the builders lender. The lender does the appraisal and the lender owns the appraisal company. Its all wrapped up. Regardless, if prices have gone way down the appraisal still comes in right where it should. They won't honor any appraisal I get independently, but its ok for the lender to own the appraisal company. Isn't something wrong with this picture?

[azjack]

" Most people are ecstatic when their appraisals come in higher than the purchase price because it means you're buying the house under market."

With an appraisal that ignores relevant sales and a declining market, the house is not being purchased under market.

Good luck with whatever you are trying to do. You say that you still want to buy the house, but it may be worth losing the deposit to not close if the house is worth $40K less than you are paying.