Appraisal came in low. Now what?

[Dave Versch]

I applied for a mortgage with Bank of America about 5 weeks ago. I'm supposed to close on this 2 family on 3/27. I've been bugging them for the past week because they haven't had the appraisal done yet. Finally today they called me and said the appraisal came in at 22K. The purchase price of the house was 26.5K and the loan was supposed to be 21,200. So they won't give me the loan because it's at 96% LTV. So I say give me the loan for whatever is 80% of 22K (17,600) and they say they'll call me back. Some nitwit in their underwriting department calls me back later in the day and tells me that they won't give me the loan either way because the appraiser didn't like the "condition of the house". I asked him to elaborate and he tells me that it looked like one side of the roof was replaced recently and the other side wasn't. Well, that happens to be true, but SO WHAT!!??

Anyway, my contract is contingent upon getting mortgage approval so I can get out if I want to. But I think I want to do the deal anyway because the numbers are very good. I can just pay cash and get the money from my HELOC. Has anyone had a similar situation? How accurate are appraisals really? If I'm paying 26.5K for a house that appraised at 22K, am I definitely overpaying or is this extremely subjective? Any thoughts would be appreciated.