What to do when an appraisal comes back low when selling!!??

[Dan Beaulieu]

Hi everybody and thanks in advance for answering my question! I have 24 hours to respond to the buyers so I hope somebody will provide me with some direction. I recently listed a rehabbed property for sale at 539,000. I had multiple offers ranging from 545,000 to 550,000 in the first 24 hours! I locked up an offer for 545,000 that could close in 3 weeks, and put two offers for 550,000 in backup position. The inspection went well, but the appraisal came back at only 515,000!!! The property is really unique and is hard to put a solid value on... but we went to the appraiser and said hey, here are multiple offers for 550,000 so that's what the market says the property is worth! Well, that didn't work very well obviously. So the buyers said they will come up with a cash difference but only up to 534,000 purchase price. There is 12 days until closing now. 

Do I say no way Jose and go with the backup offers, essentially starting a 30 day closing clock over, and risk the inspection not going as well and possibly another low appraisal? Or do I just take the very small profit at 534,000 and try not to be greedy? To wait an other month for an extra 15g when I have a guaranteed pay day in 12 days... (oh, and my holding costs are astronomical at 3,600 per month!)

[Russell Brazil]

Originally posted by @Brian Garrett:

Originally posted by @Russell Brazil:

Sounds like your agent dropped the ball here by either not knowing how to work with the appraiser or not understanding the comps. Or if you were selling it fsbo, this illustrates the most important job the listing agent has on a flip, getting the property to appraise.

Assuming ones due diligence was spot on in terms of comps and listing price, how would one do better at "getting the property to appraise" if that is out of their control? Thanks Russell.

 Its largely out of the control of an individual seller.....but not out of control of an agent.  If the appraiser that is assigned is known to be difficult, the agent should get a new appraiser assigned first off.  Then the agent should be supplying comps to the appraiser to justify the price and should be able to communicate with the appraiser the value of certain items, and understand what items add value or take away value on an appraisal as opposed to in the market. This means the agent should know that a bathroom adds $X in value in a certain neighborhood or a garage adds $Y in value in a different neighborhood. They should be able to communicate the difference in the condition scale as well as the quality of construction scale.

Those are a few thoughts off the top of my head. Working with the appraiser is a skill, but not one everyone has. If someone has sold many houses its hopefully a skill they have honed over the years, and when thats happened you wont have problem getting a house to appraise.