Was my low appraisal a set up?

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Hi,

Our offer has been accepted for a house in bay area. We are putting 30% down payment for that house. Our appraisal has come 25K less than sale price, just enough that deal does not fall apart. Our broker said that loan will still be the same, interest rate is also the same. Only loan to value ratio is different. For example, now our down payment which is intended to be 30% will be counted as 28%.

I have the feeling that our appraisal was set up. Appraiser and broker/lender had a number in their mind so that they could get maximum out of us without breaking the deal. As we are putting 30% so deal does not fall apart, we still get the same rate which is for above 25% down payment but bank owns our house a little more.

Appraisal report is completely wrong, I can't begin to tell errors and inconstancies in the appraisal. We have filed an appeal for the appraisal with detailed comments on errors in the report. It looks completely bogus. Comps are not really comps, all of them belongs to 7/10 school rather than 10/10 school our house is tied to. All of them are towards south of our place, different neighborhood. and sale dates are older than 3 months. Market has gone 15% up in last 3 months in this area.

Are we being deceived by lender? Is it possible that appraisal was fixed by lender to own our house a little more?

Another bank is willing to give us loan on same conditions but obviously there will be a new appraisal. Should we stick with this bank or go to the second bank? Suggestions are welcome.

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longwood8 (Apr. 17, 2013 @ 8:57a) |


As long as your loan terms aren't changing as a result of the appraisal, why do you care? Why would you go to a different bank and pay for a new appraisal to get the same loan terms you are getting with the current bank?

2659857 said:   Hi,

Our offer has been accepted for a house in bay area. We are putting 30% down payment for that house. Our appraisal has come 25K less than sale price, just enough that deal does not fall apart. Our broker said that loan will still be the same, interest rate is also the same. Only loan to value ratio is different. For example, now our down payment which is intended to be 30% will be counted as 28%.

I have the feeling that our appraisal was set up. Appraiser and broker/lender had a number in their mind so that they could get maximum out of us without breaking the deal. As we are putting 30% so deal does not fall apart, we still get the same rate which is for above 25% down payment but bank owns our house a little more.

Appraisal report is completely wrong, I can't begin to tell errors and inconstancies in the appraisal. We have filed an appeal for the appraisal with detailed comments on errors in the report. It looks completely bogus. Comps are not really comps, all of them belongs to 7/10 school rather than 10/10 school our house is tied to. All of them are towards south of our place, different neighborhood. and sale dates are older than 3 months. Market has gone 15% up in last 3 months in this area.

Are we being deceived by lender? Is it possible that appraisal was fixed by lender to own our house a little more?

Another bank is willing to give us loan on same conditions but obviously there will be a new appraisal. Should we stick with this bank or go to the second bank? Suggestions are welcome.

I dont see how the bank benefits from this or that you lose. As long as you offered what you consider fair and it apprised enough to let financing go through, what is the problem.
ETA: Where do you get this "to own our house a little more" from?

See if you can use that as reasoning for a lower taxable property value

uutxs said:   w2659857 said:   Hi,

Our offer has been accepted for a house in bay area. We are putting 30% down payment for that house. Our appraisal has come 25K less than sale price, just enough that deal does not fall apart. Our broker said that loan will still be the same, interest rate is also the same. Only loan to value ratio is different. For example, now our down payment which is intended to be 30% will be counted as 28%.

I have the feeling that our appraisal was set up. Appraiser and broker/lender had a number in their mind so that they could get maximum out of us without breaking the deal. As we are putting 30% so deal does not fall apart, we still get the same rate which is for above 25% down payment but bank owns our house a little more.

Appraisal report is completely wrong, I can't begin to tell errors and inconstancies in the appraisal. We have filed an appeal for the appraisal with detailed comments on errors in the report. It looks completely bogus. Comps are not really comps, all of them belongs to 7/10 school rather than 10/10 school our house is tied to. All of them are towards south of our place, different neighborhood. and sale dates are older than 3 months. Market has gone 15% up in last 3 months in this area.

Are we being deceived by lender? Is it possible that appraisal was fixed by lender to own our house a little more?

Another bank is willing to give us loan on same conditions but obviously there will be a new appraisal. Should we stick with this bank or go to the second bank? Suggestions are welcome.

I dont see how the bank benefits from this or that you lose. As long as you offered what you consider fair and it apprised enough to let financing go through, what is the problem.
ETA: Where do you get this "to own our house a little more" from?


I think that his down payment is remaining the same, while the loan is increasing by $25k to cover the lower appraisal. So he owes more on the house, but the terms remain the same because he is still below 75% LTV.

Gamethesystem said:   2659857 said:   Our broker said that loan will still be the same, interest rate is also the same. Only loan to value ratio is different.

I think that his down payment is remaining the same, while the loan is increasing by $25k to cover the lower appraisal. So he owes more on the house, but the terms remain the same because he is still below 75% LTV.
Doesn't sound like that at all.

---

Gamethesystem said:   uutxs said:   2659857 said:   Hi,

Our offer has been accepted for a house in bay area. We are putting 30% down payment for that house. Our appraisal has come 25K less than sale price, just enough that deal does not fall apart. Our broker said that loan will still be the same, interest rate is also the same. Only loan to value ratio is different. For example, now our down payment which is intended to be 30% will be counted as 28%.

I have the feeling that our appraisal was set up. Appraiser and broker/lender had a number in their mind so that they could get maximum out of us without breaking the deal. As we are putting 30% so deal does not fall apart, we still get the same rate which is for above 25% down payment but bank owns our house a little more.

Appraisal report is completely wrong, I can't begin to tell errors and inconstancies in the appraisal. We have filed an appeal for the appraisal with detailed comments on errors in the report. It looks completely bogus. Comps are not really comps, all of them belongs to 7/10 school rather than 10/10 school our house is tied to. All of them are towards south of our place, different neighborhood. and sale dates are older than 3 months. Market has gone 15% up in last 3 months in this area.

Are we being deceived by lender? Is it possible that appraisal was fixed by lender to own our house a little more?

Another bank is willing to give us loan on same conditions but obviously there will be a new appraisal. Should we stick with this bank or go to the second bank? Suggestions are welcome.

I dont see how the bank benefits from this or that you lose. As long as you offered what you consider fair and it apprised enough to let financing go through, what is the problem.
ETA: Where do you get this "to own our house a little more" from?


I think that his down payment is remaining the same, while the loan is increasing by $25k to cover the lower appraisal. So he owes more on the house, but the terms remain the same because he is still below 75% LTV.

That is not what the highlighted part of OP says.

Even if what you say is correct, who gets the extra 25k that the bank is lending? The seller? OP? How will the bank gain in this?

If you can't get the appraisal to change. Then change your offer to 25k less. If seller won't concede find another house. Never become attached to inanimate objects.

I don't see how the broker would benefit at all from doing that.

The bank does not own your house "a little more" from this. The bank has a loan and your home is the collateral. The only way they cash in is if you stop making payments and they foreclose. Otherwise all the bank has is your promise to pay back the money in 15 or 30 with ~2-3% interest.

2659857 said:   So, here the actual numbers. Our offer is at 856,000, we are paying 30% of the offer that is 256,000. Appraisal came at 830,000 so our same downpayment becomes 28%. Loan is still 599,200 but now it is 72% LTV. We don't have any disadvantage what so ever in future? Don't we have less equity in the house now? 28% instead of 30%.

Tax saving is a good idea but i highly doubt that. I will check it though.

The LTV is relevant for one important reason: lenders will not lend above a certain LTV and/or charge higher interest rate for higher LTV. Neither of this is happening.

What ultimately is relevant is how much someone else will pay for this house, when you are ready to sell. This appraisal is completely irrelevant for that assuming you are not going to sell it tomorrow or in the next few months.

If you are this concerned about the appraisal amount, you must have done one BEFORE making an offer and used that as a negotiating tool. Not that the seller will necessarily budge but it is a negotiation tactic.

As long as your terms are not changing and you are not putting more down, it does not matter. The appraisal is just to protect the bank to prove that they are not giving a $600K mortgage on a house worth $500K. The 2% change in loan to value ratio is not a concern to the lender so it shouldn't be to you either. Your house is only worth what you can sell it for when you decide to sell it.

2659857 said:   So, here the actual numbers. Our offer is at 856,000, we are paying 30% of the offer that is 256,000. Appraisal came at 830,000 so our same downpayment becomes 28%. Loan is still 599,200 but now it is 72% LTV. We don't have any disadvantage what so ever in future? Don't we have less equity in the house now? 28% instead of 30%.

Tax saving is a good idea but i highly doubt that. I will check it though.
Less equity? You are paying 856K and putting down 256K. You have 256K in equity in the house

2659857 said:   So, here the actual numbers. Our offer is at 856,000, we are paying 30% of the offer that is 256,000. Appraisal came at 830,000 so our same downpayment becomes 28%. Loan is still 599,200 but now it is 72% LTV. We don't have any disadvantage what so ever in future? Don't we have less equity in the house now? 28% instead of 30%.

Tax saving is a good idea but i highly doubt that. I will check it though.


No, you have exactly the same amount of equity. Equity value = potential sale value - remaining loan amount. It doesn't matter what the bank thinks you can sell it for, it's what you can actually sell it for. The bank may think your equity is less, but if you think the house can still sell for 856k, then you can value your equity at 30% regardless.

Forget the percentages. All that matters are the hard numbers. You're paying 856k and borrowing 599k and have the same house, period.

In the future, maybe you're slightly worse off in the case where the house lowers in value such that your LTV goes above 80%. In that case, you'd have trouble refinancing if you wanted to later on. However, if you refi, they'll probably have to do a fresh appraisal (unless it's within a year), so this one will be moot anyway.

People really need to stop thinking that appraisals mean anything. What one dude that walks through, often unfamiliar with the neighborhood, tries to come up with for a value from a step-by-step procedure, is meaningless. It's what the market would bear if you sold your house. All it takes is one buyer to determine value.

What I don't understand is how somebody this stupid can afford a $856,000 house. There is something wrong with this.

I am glad this does not affect your deal. Appraisers are required to be state certified. I would suggest reporting the Appraiser to the appropriate agency and let them handle it, otherwise there is not much you can really do. If there is some type of pattern of practice and others have reported this, you could possible see something...

All of your answers are really helpful. I though LTV = equity and in case of sale after price hike, bank will own 72% and we will own 28%. What I understand is that In case of price hike or sale, bank won't get any benefit by having more LTV% unless its foreclosed. I really appreciate all your answers.

SpeedingLunatic, I was expecting that someone will point that out. Thanks

3% on the value is hardly unjust.

2659857 said:   we still get the same rate which is for above 25% down payment but bank owns our house a little more.
You are going to owe the bank the same amount no matter what the appraisal comes in at. What do you think anyone is gaining from this? Besides, you are buying a $1,250,000 house - a $25k fluctuation in value is little more than a rounding error.

And can we cool it with the "the bank owns my house because I got a mortgage" crap?


Edit: WAIT A MINUTE - if you are putting up the same down payment, and the appraisal is prompting the ratio to go from 30% to 28%, that means value of the house has to be HIGHER than what you were figuring... A lower value would cause your down payment percentage to go up.

Glitch99 said:   
Edit: WAIT A MINUTE - if you are putting up the same down payment, and the appraisal is prompting the ratio to go from 30% to 28%, that means value of the house has to be HIGHER than what you were figuring... A lower value would cause your down payment percentage to go up.


As far as the bank is concerned, OP just took 25k from his down payment and gave it away to the sellers.

We bought a house a few months back that appraised low as well. We ended up having to cover the difference between appraised value and sales price (following the split between buyer and seller to cover it)... because our loan amount was now smaller, our down payment went down.

GodelianKnot said:   Glitch99 said:   
Edit: WAIT A MINUTE - if you are putting up the same down payment, and the appraisal is prompting the ratio to go from 30% to 28%, that means value of the house has to be HIGHER than what you were figuring... A lower value would cause your down payment percentage to go up.


As far as the bank is concerned, OP just took 25k from his down payment and gave it away to the sellers.

Yeah, I already straightened that out in my head. The down payment is meaningless, it's the amount being financed that matters, and that amount stays the same even when the value decreases.

SpeedingLunatic said:   What I don't understand is how somebody this stupid can afford a $856,000 house. There is something wrong with this.


Seriously
Op you have a terrible agent , as well as a terrible understanding of the loan and home buying process .

Presumably you have an appraisal contingency in your purchase agreement (do you?)

Since the house didnt appraise for $856k but only $830k your realtor should have immediately went to the listing agent and negotiated a price reduction for you . Or is one agent representing both seller and buyer?

Maybe you would not get a reduction all the way to $830k but at least a partial discount since the home didnt appraise and likely would not appraise for another buyer either .

So the person scamming you is your agent , for not providing the services you hired them to do.

Lastly , while I can somewhat excuse your lack of knowledge in the home buying process as its not something most people do often , what you can't be excused for is not having professional representation In this transaction involving almost a million dollars . A $500 review by a decent RE attorney could have saved you $25,000 since your realtor is incompetent. You are penny wise and pound foolish, and are concerning yourself over silly things like ltv of your downpayment , completely ignoring the fact you are overpaying by $26,000

Troll?

Gamethesystem said:   uutxs said:   w2659857 said:   Hi,

Our offer has been accepted for a house in bay area. We are putting 30% down payment for that house. Our appraisal has come 25K less than sale price, just enough that deal does not fall apart. Our broker said that loan will still be the same, interest rate is also the same. Only loan to value ratio is different. For example, now our down payment which is intended to be 30% will be counted as 28%.

I have the feeling that our appraisal was set up. Appraiser and broker/lender had a number in their mind so that they could get maximum out of us without breaking the deal. As we are putting 30% so deal does not fall apart, we still get the same rate which is for above 25% down payment but bank owns our house a little more.

Appraisal report is completely wrong, I can't begin to tell errors and inconstancies in the appraisal. We have filed an appeal for the appraisal with detailed comments on errors in the report. It looks completely bogus. Comps are not really comps, all of them belongs to 7/10 school rather than 10/10 school our house is tied to. All of them are towards south of our place, different neighborhood. and sale dates are older than 3 months. Market has gone 15% up in last 3 months in this area.

Are we being deceived by lender? Is it possible that appraisal was fixed by lender to own our house a little more?

Another bank is willing to give us loan on same conditions but obviously there will be a new appraisal. Should we stick with this bank or go to the second bank? Suggestions are welcome.

I dont see how the bank benefits from this or that you lose. As long as you offered what you consider fair and it apprised enough to let financing go through, what is the problem.
ETA: Where do you get this "to own our house a little more" from?


I think that his down payment is remaining the same, while the loan is increasing by $25k to cover the lower appraisal. So he owes more on the house, but the terms remain the same because he is still below 75% LTV.


you are the main reason why our education system is failing miserably.

Why do yo want to owe more than the property is worth, right off the bat?

I guess this is the new housing bubble, people paying above appraised value for a property. In version 2.0 they pay it upfront instead of sticking it to the lender later.

Someone make the stupid stop!

SUCKISSTAPLES said:   SpeedingLunatic said:   What I don't understand is how somebody this stupid can afford a $856,000 house. There is something wrong with this.


Seriously
Op you have a terrible agent , as well as a terrible understanding of the loan and home buying process .

Presumably you have an appraisal contingency in your purchase agreement (do you?)

Since the house didnt appraise for $856k but only $830k your realtor should have immediately went to the listing agent and negotiated a price reduction for you . Or is one agent representing both seller and buyer?

Maybe you would not get a reduction all the way to $830k but at least a partial discount since the home didnt appraise and likely would not appraise for another buyer either .

So the person scamming you is your agent , for not providing the services you hired them to do.

Lastly , while I can somewhat excuse your lack of knowledge in the home buying process as its not something most people do often , what you can't be excused for is not having professional representation In this transaction involving almost a million dollars . A $500 review by a decent RE attorney could have saved you $25,000 since your realtor is incompetent. You are penny wise and pound foolish, and are concerning yourself over silly things like ltv of your downpayment , completely ignoring the fact you are overpaying by $26,000


This is exactly correct.

Given the fact that you have 30% down, you should be THRILLED that the appraised value came in lower than the selling price. That gives your agent a new lever to pull to negotiate with. If I was in your situation, I would be so happy I had a bad appraisal done.

op must be moving into nob hill, san fran.

Also, in what area has the real estate market gone up 15% in 3 months ????

sfvera said:   Also, in what area has the real estate market gone up 15% in 3 months ????

Maybe someone was shooting in the back yard and hit crude.

sfvera said:   Also, in what area has the real estate market gone up 15% in 3 months ????

http://www.bizjournals.com/orlando/news/2013/04/15/orlando-resal...

While it's not in 3 months, the Orlando area seems to be climbing back.

hfzeus said:   sfvera said:   Also, in what area has the real estate market gone up 15% in 3 months ????

Maybe someone was shooting in the back yard and hit crude.


What on earth would you be shooting that you could hit oil? Cannons? Rockets?

Edit: lol, I just got it. I think you meant shoveling? Maybe?

SUCKISSTAPLES said:   
Seriously
Op you have a terrible agent , as well as a terrible understanding of the loan and home buying process .

Presumably you have an appraisal contingency in your purchase agreement (do you?)

Since the house didnt appraise for $856k but only $830k your realtor should have immediately went to the listing agent and negotiated a price reduction for you . Or is one agent representing both seller and buyer?

Maybe you would not get a reduction all the way to $830k but at least a partial discount since the home didnt appraise and likely would not appraise for another buyer either .

So the person scamming you is your agent , for not providing the services you hired them to do.

Lastly , while I can somewhat excuse your lack of knowledge in the home buying process as its not something most people do often , what you can't be excused for is not having professional representation In this transaction involving almost a million dollars . A $500 review by a decent RE attorney could have saved you $25,000 since your realtor is incompetent. You are penny wise and pound foolish, and are concerning yourself over silly things like ltv of your downpayment , completely ignoring the fact you are overpaying by $26,000
That's a lot of crappy advice SIS. Just because you may be a good lawyer doesn't mean it's easy to find a good RE attorney for $500. Just as there are bad doctors, bad appraisers, and bad real estate agents, there are bad lawyers who give out crappy opinions. I also don't see how a real estate attorney could save the OP anything in this situation. You think a rational seller is going to sign a contract with a clause that would adjust the contract price to match whatever the appraisal came out to be? Are you in all seriousness claiming that? What seller in their right mind would agree to such a contract? Would you? A motivated seller in a down market may be persuaded by the buyer through conversation to lower the price if the appraisal came back low, but having it in the contract in the current up market? That's a good way to never get your offer accepted.

BradisBrad said:   hfzeus said:   sfvera said:   Also, in what area has the real estate market gone up 15% in 3 months ????

Maybe someone was shooting in the back yard and hit crude.


What on earth would you be shooting that you could hit oil? Cannons? Rockets?

Edit: lol, I just got it. I think you meant shoveling? Maybe?


Kids these days don't know the classics...

cruisencode said:   sfvera said:   Also, in what area has the real estate market gone up 15% in 3 months ????

http://www.bizjournals.com/orlando/news/2013/04/15/orlando-resal...

While it's not in 3 months, the Orlando area seems to be climbing back.


I've been house hunting in the Orlando area for months now, and while I am not sure it's gone up 15%, it has certainly picked up around 10% since January of 2012. Things are picking up here. Of course, Orlando was a bit of an outlier anyways when considering the housing bubble/crash, as compared to the rest of the country.

Skipping 7 Messages...
BradisBrad said:   hfzeus said:   sfvera said:   Also, in what area has the real estate market gone up 15% in 3 months ????

Maybe someone was shooting in the back yard and hit crude.


What on earth would you be shooting that you could hit oil? Cannons? Rockets?

Edit: lol, I just got it. I think you meant shoveling? Maybe?


Its official... The internet does make you dumber.

and OP, what you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.



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