UPDATE: WANT ADVICE PLS: BIG gap between the agreed to sale price and the appraisal!

[ha98ed14]

Ok, Here's the skinny. I'd like you all's thoughts.

Seller in this case is actually a bank. This is a repo that needs tons of work. According to the inspector, the house is built like a "Sherman Tank," but it has a lot of deferred maintenance that is showing.

We had agreed on a price of $X70K. The orig asking was $X80K. We also got the bank to credit us $6K towards closing, which should cover a little more than half.

Our lender's appraisal came back $X25K. We were shocked. That is really low for that area and our town, but the house is a mess. (We were also shocked that *WE* had been so far off in what we were willing to pay.) The seller is willing to come down to $X30K. So we are talking about a difference of $5K. Our lender will not loan on more that their appraiser's value, so we would have to make up the $5K in cash.

The selling agent sent over an amendment to the contract lowing the price to $X30K. There was nothing in the amendment that said anything about removing the $6K towards closing, so I believe we still get that because it was in the contract and has not been taken out. The amendment just lowered the price. So while we have to make up $5K in cash, we get $6K towards closing. I have no idea why the seller (a bank, not a person) is quibbling about $5K in the selling price, but they are. Their appraisal came back higher than ours, so maybe that is why.

All that said, while this house is a mess, it *IS* in the school district we want, in a stable (but NOT posh or upscale) neighborhood on the "right side" of the tracks. Truthfully, I think this might be our one shot because prices in our town and area are so good right now that there are bidding wars for everything, so even tho the asking on a house may be low, the house ends up selling for lots more if it is on the right side of town.

Also, we live in SoCal. So while it is a distressed like the rest of the country, ours is still a hot market. We live in an older area that is very stable. It has a reputation of being a town with consistently good schools and it's own sense of identity, in part probably because of the college here. We have an active farmer's market 7 months out of the year, a "Night Out In _____" for New Years and two other festival things during the year.

If I follow my gut, I will do it because $5K seems like a small fraction of the selling price to be quibbling over, and we get $6K back in closing, so we kind of break even. In addition, we have already put so much time, effort and money (appraisal and escrow and inspection) into this deal. I am just tired. I do not want to start over again.

If you've read this far, Thanks. I'd be grateful for your thoughts.

**************************
Title says it all. What a PITA. We got several different appraisals, but they all said basically the same thing: We agreed to pay too much for this house. I can't believe we were so far off. Thankfully, the lender will not lend on it based on the agreed to price, but now we have to negotiate the seller down and/ or make up the difference in cash. This place needs so much work that we need all our available cash to make it livable. Not sure what our agent will be able to do. We just found this out today. And our lease is up at the end of the month. Feeling so anxious. I don't want to walk away only because I don't want to start this process all over from square one. I do like the house. In some ways it is out of my control because I can't force the bank to lend us more than the house is worth. But man, this stinks...

[BelleoftheBallFlagstaff]

This is happening a lot. I am sorry. Better to find out now, KWIM? There are TONS of people upside down in their houses. If the seller isn't willing to negotiate, there isn't much you could do. I wouldn't put any cash into make up the difference. There is no telling if the market will go lower. I *wish* we rented for 6 months until we found the perfect house. This could be a blessing in disguise.:hug:

[kijip]

In this market, the sellers might be nuts to not agree to the lower price. (Though, if they are upside down, they might opt to just not sell and wait it out).

Whatever you do, DON'T pay more than the appraisal with your cash resources. In this market, that is like burning money for fun.

Our independent appraisals came back higher than the selling price by a fair bit and I was pleased this did not mean the seller could back out. It is lucky for you that as buyers you can, since the deal is contingent on financing. So you won't lose your earnest money or anything.

[ThreeofUs]

I understand. Hugs to you - and may the seller be willing to negotiate.

[Kungjo]

If you've had a few appraisals done, then you should be able to negotiate the price down a bit. I know all sellers want to sell their homes for top dollar, but when the market states that your home is worth quite a bit less, there's no way that the seller can sell it for more and expect your bank to finance the loan.

Hope things work out for you. GL. I'm in the market for a house. Been looking for the past year and my lease is up in June. I know how stressful it is. Hugs!

[JTsMom]

I agree with Kungjo. They are likely going to come down, b/c if they don't do it with you, they are going to run into the same issue with the next buyers. Here's hoping they want to get out of it as badly as you want to get into it!

[frgsnlzrds]

That stinks. I was in a similar situation with my lease being up and after talking with the landlord I was able to rent (for a couple hundred dollars on top of my rent) on a month-to-month basis for three months. Don't let that force you into a house you don't want anymore or can't afford.

Isn't there a clause in your contract that says if you can't get a loan you don't have to buy the house?

[boolady]

Whatever you do, DON'T pay more than the appraisal with your cash resources. In this market, that is like burning money for fun.

:yeahthat:

Let this be a wake-up call to them about what they're actually going to sell this house for, given the market.

[niccig]

I agree with Kungjo. They are likely going to come down, b/c if they don't do it with you, they are going to run into the same issue with the next buyers. Here's hoping they want to get out of it as badly as you want to get into it!

:yeahthat: Don't give up on it. Friends put an offer in on a bank owned house several months ago. They thought they didn't get it, but their Realtor told them to hang in there. The move in, in a month.

I would go back to seller and try to renegotiate. If they say no, they're back to square one with selling a house that lenders won't agree to finance at the too high price. And you don't want that house at that price.

Hopefully, it will work out, and you'll be in the house at less cost.

As for you current rental, can you go month to month - yep I know it will cost more. But if you can rengotiate on this house, it'll probably be more than a month with escrow etc before you can move in. I agree with not being forced into buying a house. I wish we had looked more before buying our home. There are some things I would have done differently..

[elektra]

That sucks. Going through the whole home buying process was so stressful! I can understand your feelings to just be done with the whole thing. I have such good vibes for you though. I really think something is going to work out so great for you in the end.

[daniele_ut]

Definitely do NOT make up the difference in cash. Being upside down in a mortgage by choice is not something you want to do in this economy. Honestly, I agree with the pp who said this should be a wakeup call to the sellers that their house just isn't worth what they want to get out of it, no matter how much they want it.

We bought a bank owned home 6 months ago that needed a TON of work and our appraisal came in $30K ABOVE the price we offered. We would have simply walked away if the appraisal had been too low and the bank would not come down. No house is worth that, imo.

[MartiesMom2B]

Didn't the wording in your offer say that it would be rescinded if the appraisal wasn't at or above the sales price? I know that ours did and it was in a standard contract. Maybe that's just an NC thing.

[amandabea]

Ugh, that stinks. I agree with the PPs, don't make up the difference with cash. Let the sellers come down or walk away. Good luck - sending positive thoughts!

[Kungjo]

Well, given your reasons for wanting the house and the bank willing to lower the price substantially, I would buy the house even if I had to put in the $5k. Do you have the extra $5k?

Even though the house needs work, I think that it would be worth it since they did drop the price within $5k of the appraisal. The good schools and neighborhood would help you in terms of resale after the market recovers if you want to move. How long do you plan on staying in the house?

GL with your decision. We just found a house last night and put in an offer on it. Not my dream house, but has most of the things on my wishlist AND is reasonably priced. They have till 6pm on the 22nd to accept our offer or counter. Please keep your fingers crossed for us. (I totally understand your frustration in terms of not wanting to start over. Sigh!)

GL

[ha98ed14]

I will send out some P&PTs to the house gods for you ;).

We do plan to be in the house for a while. I mean, we do not have any foreseeable plans to move until retirement maybe? DH has a very stable job here, but when we aren't working, I doubt we'll be able to afford life here. Our money would go further elsewhere. But that is a lot of years away. We specifically bought a house with enough space that if my mom needed to live with us in her old age, she could. It would be a bit tight because it's only a 3 BR, but it has an extra large family room that could be converted if need be. Plus we only have once DC, and no immediate plans for more. So I think it would be doable.

Anyway, thanks for you thoughts.

[kijip]

2 thoughts- yes it seems odd that they are quibbling over $5K in this market and it seems that you would have some immediate "sweat equity" in this house since you will be making it livable which would more than get that $5000 back shortly as you make repairs. Passing up on your forever house in a still fairly good market over $5K would perhaps be foolish. In the situation you describe, and because it is ONLY $5K and they are doing $6K in closing costs and came down buy quite a bit, I would be inclined to go ahead especially since your husband's job is solid and you love the area.

Looking at it this way, your mortgage will be for quite a bit less than you anticipated paying so you will have more wiggle room in your monthly budget. Will you still have enough cash on hand to make the repairs/buy the appliances needed?

[amandabea]

2 thoughts- yes it seems odd that they are quibbling over $5K in this market and it seems that you would have some immediate "sweat equity" in this house since you will be making it livable. Passing up on your forever house in a still fairly good market over $5K would perhaps be foolish. In the situation you describe, and because it is ONLY $5K and they are doing $6K in closing costs and came down buy quite a bit, I would be inclined to go ahead especially since your husband's job is solid and you love the area.

Looking at it this way, your mortgage will be for quite a bit less than you anticipated paying so you will have more wiggle room in your monthly budget.

:yeahthat:

I'd do it -- most people are paying more than that for a new minivan! I'm in SoCal too and bought 3 years ago when prices were at their highest and now we're stuck. You don't even want to know what we paid versus what they're selling for now. It makes me sick to even think about it. To me it seems that for $30K you really can't go wrong if it's as you say in a good school district on the right side of the tracks.

Good luck with your decision!

ETA: OK, yes, I now see my stupid mistake...it's not $30K, it's $x30K (how silly of me!), nevertheless, I still say go for it since it's only $5K more than the appraised value!

[DebbieJ]

I'd do it.

[ha98ed14]

Well, realtor just stopped by to pick up the signed ammendment page, so if our lender is amenable to the idea of us making up the diff, I think we're gonna do it... Thanks for your thoughts.

[niccig]

:yeahthat:

I'd do it -- most people are paying more than that for a new minivan! I'm in SoCal too and bought 3 years ago when prices were at their highest and now we're stuck. You don't even want to know what we paid versus what they're selling for now. It makes me sick to even think about it. To me it seems that for $30K you really can't go wrong if it's as you say in a good school district on the right side of the tracks.

Good luck with your decision!

It's not 30K it's $X30K as in 230K or 330K or 430K.

I'd say to take it. Your mortgage will be less as the house price is less. I don't think it'll take too long to make up the 5K with your payments...plus the lower cost does give you more wiggle room in your monthly budget for years to come. You do need to do some work to it, so as long as you can afford to still do that, or don't mind putting some things off for a little bit. Just keep in mind that older homes like ours often have more problems then you can see and you don't know until you rip the carpet up to find that there is only plywood floor patching a section, so you have to put in new boards before you can refinish the floor....friends just found that. It's costing them 1200 more for their floors, but they had a very competitive quote on the work.

[ha98ed14]

It's not 30K it's $X30K as in 230K or 330K or 430K.

I'd say to take it. Your mortgage will be less as the house price is less. I don't think it'll take too long to make up the 5K with your payments...plus the lower cost does give you more wiggle room in your monthly budget for years to come. You do need to do some work to it, so as long as you can afford to still do that, or don't mind putting some things off for a little bit. Just keep in mind that older homes like ours often have more problems then you can see and you don't know until you rip the carpet up to find that there is only plywood floor patching a section, so you have to put in new boards before you can refinish the floor....friends just found that. It's costing them 1200 more for their floors, but they had a very competitive quote on the work.

Yeah. The X is holding the hundreths place. They came down $40,000. From X70 to X30. (Since RE is obscene is SoCal, I just didn't want to "go there" with the price. But this is where we have a job, so this is where we buy.)

We know a lot of what is going on, but yes, you don't know everything. I actually did pull up a lot of the carpet to look at the state of the floors underneath. The hardwoods are definitely livable. The areas that aren't hardwood (the addition) will need something. Either laminate or carpet. I'd rather do laminate, but our realtor said it might look weird because it is directly adjacent to the hardwood in the living room. So maybe tile? I just hate that tile breaks in an earthquake. That and the area is huge, so labor would be a ton to lay tile.

[niccig]

We know a lot of what is going on, but yes, you don't know everything. I actually did pull up a lot of the carpet to look at the state of the floors underneath. The hardwoods are definitely livable. The areas that aren't hardwood (the addition) will need something. Either laminate or carpet. I'd rather do laminate, but our realtor said it might look weird because it is directly adjacent to the hardwood in the living room. So maybe tile? I just hate that tile breaks in an earthquake. That and the area is huge, so labor would be a ton to lay tile.

I just wanted to mention it. My friend who just bought had a budget worked out for the work they had to do, and we all warned her that things can cost more once you start the work and realise that something else needs to be done, or that it no longer meets building code. She's since gotten upset that they're over budget because of extra wiring and the floor, but you have to roll with it. We always give ourselves a cushion for any work.

Have you thought of marmoleum? I have it in my kitchen and it was put in I think 10 years ago. It's still in good shape. When we redo the kitchen, I may use it again. A friend is putting it in her kitchen.

[JTsMom]

Have you guys thought about getting a second opinion on the appraisal? Sometimes they are negotiable, and if it would help financially, it might be worth it. Sometimes they can use comps that they normally wouldn't, just b/c there are so few recent ones. I would probably go for it in any case, especially knowing that in So Cal, 5K is a tiny percentage of the total cost, the fact that you want to be done/need to move soon, and knowing that the lack of comps/fixer status is making the appraisal come back low.

Good luck!

[amandabea]

so assuming you guys move forward and get the house, will you be moving in right away or living elsewhere while you do the work? Obviously none of my business, but I recall you saying your lease was up at month end...all I really want to say is just be prepared for the stress of living in a disaster area. I did a lot of work myself on my former home and OMG, I was so not prepared for the PITA that is renovating! I'd definitely do it again though, so don't let it scare you -- just know what you are getting into.