27 May 2012

Appraisal Drama

On Thursday we had our inspection on the house and most everything checked out ok except for the roof needs some maintenance, one outlet doesn't work, and a couple ceiling fans are installed incorrectly.  

Friday morning Albert cleared up some issue with our debt/income ratio that was caused by Albert owning a house in Florida where his brother lives and pays the mortgage.  Since we are in the process of turning the house ownership over to my brother-in-law and he has been paying the mortgage for years, it cancels itself out, but when you add it in as a debt and then bring it back as a credit it brings the ratio to the unacceptable area, while if you leave it out completely it's fine.  They left it out and the mortgage has gone to underwriting!

Friday afternoon we received a call from our lender saying that the appraisal had come in $16,000 below the selling price. The problem is that the lender will not give us a loan for more than the appraised value. Albert did some research and we talked to our realtor and the options that came up were: 1) renegotiate sale price with the buyer paying cash for anything over the appraised value, 2) buyer pays the full $16,000 shortfall in cash (not really an option for us), 3) seller decreases price to match appraised value, 4) get another appraisal (the bank may or may not accept another appraisal), or 5) deal falls through.  

Our realtor told the seller's agent that we couldn't pay the $16,000 in cash and the seller's agent said that the seller felt like the appraisal wasn't fair because the appraiser wasn't from that area.  They then bought up another option that we hadn't heard of which was for us to get a new lender and a new appraisal.  This is not ideal for us because we had to pay a processing fee of about $350 that we would lose plus we had locked in a very low rate, not to mention all the extra paper work that would be involved without the guarantee that the seller would even accept the new appraised value.  What if we did all this extra work and lost money in the process and then she wouldn't accept the terms we could offer and went with another buyer?

Albert and I decided that we could offer to pay an extra $6000 in cash so the sale price was only $10,000 under the initial agreed to price.  We offered that to the seller, but haven't heard back.  We won't get the official appraisal until Tuesday when the bank opens again so we're sure that she's waiting to see what is in the appraisal before making a decision.  We would be open to going with a different lender if we could get the same deal as we have now and have some sort of guarantee that the seller will accept the new appraisal (and pays for it).  Our realtor said that perhaps to be fair, the seller could choose three lenders that she feels comfortable with (most likely local lenders) and then we could choose from those.  We're hoping that she'll take the $6000 or counter.

It really rubbed us the wrong way when the seller was bringing up other interested buyers and how she felt confident that she could get the price she wanted from someone else.  It just goes to show that it's not over til it's over and don't fall in love with a place (although I find it impossible to commit to live in a home for the next 30 years and still stay unattached).  The short-sale we put an offer on before still hasn't come back on the market and we're guessing that it's because it's going into foreclosure.  If it did come on the market as a foreclosure and was a good price we might drop this house and go back to the other one, especially if the bank painted and put in new carpet.  I'm not messing around with short-sales anymore though.

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