Low Appraisals

My clients have been very fortunate not to have had much trouble with low appraisals. I've had several buyers that the appraisals actually came in higher than the agreed purchase price. Only once, until today, did an appraisal come in less than purchase price. That case, both seller and buyer were willing to split the difference....all good.

Today's scenario is different. My client is doing FHA financing, low down-payment. Not a ton of cash in the bank and the appraisal came in at 92% of agreed purchase price. And, drum roll here.....it's a Short-Sale (SS)......

Bummer......maybe......

The lender on this SS has been challenging to say the least. They are losing a lot and there is a second lien holder that would seemingly rather go to foreclosure than not stomp their feet and demand more.

My client has stretched as much as possible and there just isn't any further stretch room.

So, the bank should just come down, right? You'd think so. They are losing their infamous shirt already, what's another few thousand so as not to take another home into their lovely foreclosure inventory?

I've discussed it with my clients lender, he doesn't think the appraisal can be revised based upon the comps that were used. I reviewed the 32 page document and I think the appraiser did the best they could with what they had. The listing agent? Hmmm......they seem to think some miracle can happen because they don't think the bank will budge.

But, here is more fuel for the fire under the SS lenders derriere.....

1) It's an FHA loan and the property will only allow FHA financing. So, if another buyer comes along, they will be FHA, and therefore, their lender will click a few buttons and Wa-La....they will see the appraised value....and won't lend towards anymore.

2) If they can't do conventional and they can't get an FHA loan in for more....that leaves 'Cash Only' in the remarks....and we know that means someone is coming in waaaay under list price because 'Cash is King', at least in a buyers mind frequently.

We shall see what happens in the next couple of days. There are so many reasons for the bank to make this go through at the appraised value.....and there are many financial reasons why they may not.

Keep an eye out for a post on the outcome.......