Appraiser used wrong purchase price. How to proceed?

Question

Hey BP,

I received an appraisal back below purchase price and realized appraiser used initial offer and not the accepted counter offer on the appraisal report. Now there is an appraisal gap of 10k. I spoke to lender and he plans to speak to appraiser. Realtor (dual agent) said to ask the lender to speak to appraiser. What would you do?

Thanks in advance,

Tyler

Chris Svendsen · Answer

Sales price and appraised price have no correlation.  Many times appraised value may come in higher or lower than contracted price.  Ideally be great to come in above contracted price or at minimum at contracted price but never a guarantee that it will.  Can either negotiate off purchase to get to appraised value or come up with difference to get deal done.  Good luck hope works out in the end for you.

Shaun Weekes · Answer

Although this is a pain it's a simple fix.  Your loan officer needs to supply the correct addendum showing the final sales price.  After this has been delivered to the AMC ( Appraisal Managment Compnay ) it shouldn't take the appraiser more than 24 hrs to make the correct adjustments.

I hope this helps and have a good one.

Chris Mason · Answer

Ah, this one. Yup you're not the first person this has happened to, and will not be the last. Due to all the COVID people, folks who entered the industry as a realtor or a loan officer after March 2020, I'll direct part of this response at them too.

How to idiot proof this issue as...

A Realtor: when you send the contract over to loan officer, make it one single PDF. That PDF should include the contract with any/all addenda, but should not include inspection reports, seller disclosures, or anything else like that. This way even if the loan officer is an idiot and prone to screwing up (maybe they were hired for the refi boom, and this is only the 2nd ever purchase transaction they've done?!), you've fixed it and made it idiot proof for him. EXTRA BONUS POINTS: some realtors have the template mass "in escrow" email they send to all parties, with everything spelled out. I'm almost entirely "paperless" at this point, but when I see one of those I do print it on physical paper, and it's the first thing I reference whenever I touch that transaction, and that transaction gets bumped to the front of the line each day when I walk into the office (the transaction with the daily "is the appraisal back yet? when do you expect it back? are we cleared to close? when do you expect that?" [and similar] phone calls and texts gets bumped to the BACK of the line each day).

A loan officer: when the realtor sends you a single PDF with all sorts of extra stuff you don't want to see, or 5 different piecemeal PDFs in 5 different e-mails, consolidate it into a single PDF that has exactly what you need, and none of what you don't. This way even if the realtor screws up (maybe they got their real estate license "because real estate is hot" in 2020 and they'd lost their previous job?!), you've fixed it and made it idiot proof. Regardless of if you are uploading the contract to a loan portal, sending it to your processor, or uploading it to the AMC website, it should be in 100% of cases a single PDF with all addenda and no extra fluff.

A consumer: make sure at least one of the two above parties isn't a noob. You can look up your realtor's license at the state real estate website (California example) and your loan officer's license history here (same for all states). Ideally neither is a COVID noob, but you need at least one of them to predate the pandemic, in order to prevent this and a thousand other stupid little issues that are overall a waste of your time.A loan officer assistant or processor: assume the realtor, as well the loan officer that is your boss, are both complete idiots, triple check that one or both of them did the above. When you go to upload the purchase contract (to loan portal, to appraisal portal, to anything), it should be a single PDF, and you should have some double check assurances, one way or another ("this is a $755k purchase price, right?"), on the contract price.

An appraiser: verbally confirm agreed upon contract price with whichever realtor is opening the door for you. Don't do that sneaky ninja trick where you tell everyone you will be there at 11 AM, then show up at 9 AM and enter via lockbox because the MLS said it's vacant, and you don't want to talk to anyone, unless you want to get that annoying message requesting you revise the contract price upwards $15k to match an addenda that no one sent to you. Ideally you should only see a single PDF that's the contract, but check for multiple PDFs just in case. Naturally, you need to assume both realtors, the loan officer, and the loan processor, are all idiots, at all times (if you're an appraiser, I likely do not need to tell you that :P ).

This issue "should" be pretty rare, since literally 5 people in a row had to screw something up and/or fail to perform a best practice (it happens when all 5 get complacent and assume "that's someone else's job" or "someone else will do it," since we have here multiple parties who could ALL articulate an argument for why it "shouldn't" be "their" job to do it), but the only fix any one person can do, is assume the other 3 or 4 people are idiots, and plan accordingly, on every single transaction they touch.

Tyler Speelman · Answer

@Dave Skow yes, the lender was initially sent the contract with initial offer and the accepted counteroffer. The counteroffer was on the first page, but maybe overlooked.

Thanks for your advice and feedback.

Dave Skow · Answer

@Tyler Speelman-  does  your lender have the  correct addendum with  right price ? the lender  will  communicate to the  appraiser through an AMC  ( appraisal management comp )  and  the lender will  provide the AMC with the  purchase  contract  ....so it sounds like the   page with the  correct price   wasnt  forwarded  by someone  ..... ask for this form to be  sent to appraiser and  ask  for  revision to be  completed

Shiloh Lundahl · Answer

@Tyler Speelman You should have the appraiser’s number because you set up the time for the appraiser to come out to the house for the appraisal. Just give him or her a call and let him or her know that they had the incorrect purchase price. However, some appraisers are proud and will not change their appraised value even when you point out something incorrect on the appraisal. About 75% of the appraisals that we challenge change after we challenge the appraisal with data. @Chris Svendsen I don’t believe I have seen you on the forums before so I hope you don’t take this offensively, but I completely disagree with your statement that the sales price and the appraised price have no correlation. It would be great if that were the case, however, too often the purchase price does influence the appraisal. This is why when I buy properties now, I buy them under market value but then I add in a very large rehab credit to bring the purchase price to market value so that I don’t take a hit on the appraisal. I have done this with over 100 properties over the past 3 years and I have seen it work so well that I have made several videos about it on my YouTube channel. So even though I agree that it should not have any correlation, unfortunately, the purchase price very much does have an effect on most appraisals.

Erik Browning · Answer

A work of art

Shiloh Lundahl · Answer

@Tyler Speelman this is one of the reasons that I always go with two different lenders when looking at getting a loan. Because if there’s a mess up with one, I can just go to the other one. If it were me, I would go with the other lender if this lender isn’t being very helpful and working with you.

Dave Skow · Answer

@Tyler Speelman- 1)  so the  value didnt  change  on appraisal  right ?  not a  suprise  as  the  appraiser  prob used the  best  comps  and the  the value was  where it landed  2)  the realtor / seller cant dictate the appraised  value  3)  the lender  likely will not allow you to pay for and  order a  new appraisal  - confirm with lender ...even if new  appraisal was allowed - this would put  your closing  several weeks  out  which  would likely  endanger the  transaction and also the  rate lock  4)  if the value came in 10K  lower - this doesnt mean you need to  bring in an additonal 10K ..the loan to value will  be  adjusted  using the  lower appraised  value and you might need to bring in  more to close  but not  10K  eg.    assuming  a 400K purchase price  and  assuming loan amt of  380K  ( 95% ltv) and  not that  value is 10K less ...lender will use  390K  to  calculate  ltv and  pricing  ...if uyou keep the loan amt at  380K  your  new ltv is  now  too high at  97.43%   (  380K / 390k)   and you will need to  either lower the loan amt to 370,500  ( 95% of  390K )   or  if  you  qualify for the  97% ltv  program  - the loan amt of  378,300  might be a possibility ....ask you lender for options and  good luck

Nick Belsky · Answer

@Tyler Speelman

Appraisers are human too, they make mistakes.  Be kind and simply ask for a revision with supporting documentation and all will be fine.  These things happen.  Don't stress too much about it.

Cheers!

Appraiser used wrong purchase price. How to proceed?

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