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Appraisal question for Austin area home purchase


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My son is looking to buy in NW Austin.  Found a house he liked and offered what is standard in the area: 10-15% over ask.  HIs agent was comfortable with that as was the loan officer helping him out.  He lost out on 3 other homes in the same neighborhood, as he did not bid high enough.

Appraiser shows up and appraises as 1-2% over ask.  Appraiser made mistakes in (1) price offered (2) home materials used (3) improvements (4) used ask price of aforementioned homes as comps (not sale prices).

Agent said to wait to appeal until after the homes he missed out on closed - so they could update their comps.  Appraisal company refuses to review or re-appraise.

His options

  • put *way* more money down.
  • change mortgage companies, get new appraisal, and new 1% higher interest rate.

Option 1 is possible, but not the best.  Option 2 kinda screws him.

Is what happened common?  I am pretty sure the appraisal company will not be used by this lender again.

Also, what would you do?

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How much time is left on his rate lock?  That 1% increase may be his new rate either way- or some portion of it if it costs an eight or quarter to extend for 5-15 days as you fight. 
 

appraisal company has no incentive to work with you.  Are all the comps listings and none sales?  
 

anyway the market isn’t in his favor.  It takes a while for the market to reset to higher values.

you did not say what your son’s expected LTV was to start with- can he move to say a 95% LTV and put down the 5% plus the difference between appraised value and sales price?  Or is it already a high LTV product?

 

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1 hour ago, Pato del Muerto said:

How much time is left on his rate lock?  That 1% increase may be his new rate either way- or some portion of it if it costs an eight or quarter to extend for 5-15 days as you fight. 
 

appraisal company has no incentive to work with you.  Are all the comps listings and none sales?  
 

anyway the market isn’t in his favor.  It takes a while for the market to reset to higher values.

you did not say what your son’s expected LTV was to start with- can he move to say a 95% LTV and put down the 5% plus the difference between appraised value and sales price?  Or is it already a high LTV product?

 

Thanks for the reply. 

Rate lock has around a week left.  You are right that it might not matter.

Agree about appraisal company having zero incentive to work with us.  They are accountable to the lender.  They are using a mix of listings and sales, which I found odd.

LTV was high - 90%.  Did not want to empty the bank account.  May have to go to 95%, which would make me nervous.

Upon reflection, none of this is really that strange.  Appraiser is accountable to the lender.  I was just surprised that it was so far off.  Your point about the trailing edge adaptation to new values is likely what is going on.  There are tons of folks dropping in w/ 20% over ask, cash only offers in Austin right now.

I'll just see how it plays out.   

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19 minutes ago, Bevo said:

Why not just give him the extra cash that he needs to make the purchase?

That's the backup plan.  Wife and I are fine w/ it.  He wants to be his own man, etc.

9 minutes ago, Pato del Muerto said:

Why would you be nervous about 95% of an incorrectly low appraisal, vs 90% of a higher correct valuation?

That's just my nature.  High LTV makes me nervous, regardless of situation.

In reality, we'd really already solved the problem; I was just curious about other folks' experiences in a market like this.

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38 minutes ago, boilerhorn said:

That's the backup plan.  Wife and I are fine w/ it.  He wants to be his own man, etc.

That's just my nature.  High LTV makes me nervous, regardless of situation.

In reality, we'd really already solved the problem; I was just curious about other folks' experiences in a market like this.

cash game in todays market - pay to play hope that the market just keeps going nuts. IMO it really sucks, but if he can afford the payment then fuck it, it'll be cheaper than rent in 5 years unless the economy implodes here (spoiler alert: it wont)

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Absolutely a crock of shit the appraiser won’t review. We have (and sometimes successfully) sent in several rebuttals saying here are the comps that support our valuation. Pretty sure they can’t just tell you no. Now whether he actually agrees to or changes it is a whole different deal but I’m pretty sure they can’t flat out tell you no we won’t. 

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cash game in todays market - pay to play hope that the market just keeps going nuts. IMO it really sucks, but if he can afford the payment then fuck it, it'll be cheaper than rent in 5 years unless the economy implodes here (spoiler alert: it wont)

5 years? Hell, closer to 5 months in this stupid market.
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I’m surprised that Seller even accepted your son’s offer that far “over ask” on a conventional loan in the absence of an appraisal waiver (e.g. promising in advance to makeup the difference)…this outcome was not difficult to predict.

As mentioned above, only reason you haven’t heard more stories like these recently is because vast majority of bidding wars are going to cash buyers which renders the appraisal issue moot.

If your son is focused on “being his own man” then he should buy a tract home somewhere outside of San Marcos that he can viably afford with financing direct thru the builder…he’s almost guaranteed to never get an appraisal to match “over the top” offer prices in Austin unless there is a seismic market correction….at which point he will either be facing exorbitant interest rates, wrecked portfolio, and/or loss of employment and therefore screwed regardless.

Just give him the cash to close and call it good; you are both very fortunate to even be in this situation if he’s dead set on buying in Austin.


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