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August 7, 2011
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Getting home appraisal and sale price to match is getting tougher
DURHAM -- Financing a home purchase in Raleigh, Durham, Chapel Hill and across North Carolina has become extremely difficult since the housing boom turned to bust. Getting an appraisal to match the price for which one's lender has preapproved a mortgage can be more art than science.
In June, a sizable share of U.S. purchase contracts for previously owned houses, signed 45 to 60 days earlier, were canceled by buyers because of appraisal/asking-price mismatches. In a month when Realtors expected sales to rise, they dropped instead.
Having a contract fall through is tough on the buyer and it leaves the seller, who might have contracted to buy a new property in anticipation of selling the old one, out in the cold, too.
Is there any way to salvage these deals?
Options are limited, said one local appraiser.
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"Most times, when the appraisal comes in lower than the sale price, the sale price can be renegotiated," he said. "But many times, the seller can't afford to go any lower. Many buyers will walk from the deal if they believe they are overpaying."
Under federal law, buyers can obtain a copy of the appraisal from a broker or lender.
Challenging the appraisal generally is not an alternative, the appraiser said.
"If there is truly a reason to believe the appraisal is wrong," he said, "the lender still will not allow a second appraiser" to assess the property.
"Sometimes it's the appraiser's mistake, sometimes a seller is stubborn with asking price, sometimes the buyer is uneducated, and sometimes the agent is mistaken," he said. "Bottom line, it's a tough market."
Jerome Scarpello of Leo Mortgage agreed: "I wouldn't waste time appealing unless there are blatant errors in the report - like missed rooms adding square footage. An appraisal is an opinion of value, so unless there are some compelling reasons, opinions are rarely changed."
Still, Fred Glick, a mortgage broker and Realtor, isn't so sure you shouldn't fight back.
"The buyer can challenge the appraisal," he said, "especially if the comparable homes were wrong, or proper comps [short sales or foreclosures] were not used."
The best away to avoid such issues, of course, is to try to anticipate them.
"Have your real estate agent do comps before an agreement is made or before a property is listed," Glick said.
Fox, too, advised: "Be proactive, rather than scrambling around after the fact, and after you paid for a home inspection, termite inspection, and the like."
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