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john p · Joined: 10 Mar 2006 Posts: 1820

I just went to zillow to see the "Zestimate" of a house that is for sale on my street. The asking price for the house is $100k greater than the "Zestimate". The Zestimate is over $120k less than what the owner paid back in 2006 (24% less than what was paid back in 2006). The asking price is 4% less than what was paid for the house in 2006.

Now I know all the criticisms regarding Zillow, but this is a very large spread. It makes you wonder how other appraisers evaluate the properties.

I was wondering if anyone heard of any issues regarding having deals fall through due to appriasals that were significantly less than the agreed sales price?

I know when I went to refinance, the banks used a significantly lower number for the value of my home so it kept me from qualifying due to loan to value, but if the same bank used the same evaluation (the bank representative told us they use Zillow), I'd be surprised if they approved any sales in my town as the numbers are so far apart.

I know the government is pushing banks to get the money out there, but the banks are playing games with the evaluation and appraisals. I think there needs to be some oversight in these matters because the people who end up qualifying end up being those that don't need the stimulus to begin with and were never damaged by the downturn of the housing bubble as they bought before the bubble. So basically we're giving medicine to those that suffered no real injuries...

Brian C · Joined: 13 Feb 2009 Posts: 98

For the property im buying, the Zestimate is $347k. The original asking price was about $20k over that. I ended up purchasing for $307k.

The appraisal came in at $380k. I think thats a little high but the only homes that sold recently in the area were in the mid $400s. They also looked at the house across the street that's the identical house which sold for $379k back in 2002. I didn't think they were going back that far but the report showed it.

Have you tried other appraisal sites? Cyberhomes appraisal was $302k, which is lower. Eppraisal was $308k (right on!).

GenXer · Joined: 20 Feb 2009 Posts: 703

Higher appraisal (when you bought a house for 300k) only benefits the town which can tax you more. Its all fictitious anyway, so I wouldn't necesarily put any meaning into those numbers. Appraisal should be what you paid for the house, not anything else.

Brian C · Joined: 13 Feb 2009 Posts: 98

Update: Since the appraisal process has changed since May 1st, they have notes for another appraisal by another company. Im supposed to sign papers tomorrow and now might be delayed another week!
The first appraisal was above the selling price but looks like they want verification with another company. This is crazy......

john p · Joined: 10 Mar 2006 Posts: 1820

Wow.

I would say that your instinct was right that the appraisal was a little high.

If I were in your shoes I'd be thinking about what the lender might be concerned with.

I don't think that the lender would be concerned that your house isn't worth what you paid. (Very nice job on that deal again...).

I think what the lender is concerned with is the percentage of equity. I'm not sure how this works, maybe JCK can chime in, but your PMI has to do with what percentage of the home you have a current share in. If you own 20% more of the value of your house you can avoid PMI (mortgage insurance). I think that what would make sense is that they determine the value of your property based on what you paid, but it might not work like that because people who refinance use an appraisal, so maybe they just want the appraisal to align with the price.

I think the real issue would have been if you agreed to $380k and it appraised at $308k. Who knows, perhaps your caught up in a protocol that was meant to address the inverse of what happened to you?

Stay calm. You need to make sure the seller knows that you're acting in good faith to resolve this because they're most likely shitting a brick too. Remind yourself that you paid like $70k under the appraised value and this might be a due dilligence Lt. Columbo loose end that needs to be tied off....

When did you lock in? Did you get a rate back when things were in the high 4's or did you get in after the big jump about a few weeks ago? I would have my lawyer make a few phone calls to just make sure that the lender doesn't "Go There" and try to renegotiate the deal or terms i.e. adding points or some other b.s.

Brian C · Joined: 13 Feb 2009 Posts: 98

john p · Joined: 10 Mar 2006 Posts: 1820

You might have a down payment for 20% of the price you paid, but that doesn't necessarily mean that you have 20% equity if the appraisal comes in lower than what you paid....

I very much doubt this would be the case as you have a ton of cushion in there. I'd relax a bit behind the scenes, but keep the pressure on the team to drive this home.

Brian C · Joined: 13 Feb 2009 Posts: 98

I feel like a man version of Bridezilla!!

Between my attorney, broker, and realtor we finally got things straightened out. My realtor said the original appraiser only used the Merrymount area of Quincy and didn't extend like they should. The new appraisal was more in line with the Zillow estimate, 335k.

It would be good to find out how far do they extend for comps?

Even though the new appraisal is in, my closing has been moved further out in the day.

By the way, I will be documenting the renovations on the property and will post my updates in the Open Discussion.

Rental Lease · Joined: 28 Jan 2009 Posts: 21

My experience has been that they're appraising for about 25% less than expected, due partially to the slack real estate market, partially to appraisers having grown extremely conservative in order to maintain their relationships with skittish lenders, and partially due to lenders specifically asking for extra low numbers.
It's an easy market to buy in, but a hard market to borrow in.
Best of luck,
_________________
Brian

Renting in Mass · Posted: Wed Sep 09, 2009 12:57 pm GMT Post subject:

My agent mentioned recently that he's been losing some deals to low appraisals.

john p · Joined: 10 Mar 2006 Posts: 1820

The two comps on my street finally came through and my Zillow "Zestimate" has gone up $100k since May.....

I felt like I had a legitimate beef when rates were in the high 4's and I couldn't access them because appraisers were erring on the side of caution and certain banks told us they were using Zillow. My issue was that if the government is extending a benefit and the President was saying "This is a great time to refinance", it is wrong that banks can get taxpayer money and then are supposed to extend an encouraged benefit to citizens and then use "Zillow" to execute that policy. Basically, Zillow was the reason why I couldn't get to refiance. Sure, I could have paid for an appraiser but that was a total crap shoot. So in the end, the citizens in financially stable towns like Newton got to cash in on that benefit and most of them never needed the adreneline shot in the first place.

JCK · Joined: 15 Feb 2007 Posts: 559

Well, rates are still pretty low, so I'd keep looking out for a good refinance deal, if you can get one (now that your place is worth an additional $100k).

john p · Joined: 10 Mar 2006 Posts: 1820

Hey JCK, how the hell are ya? I haven't heard from you in a while. What's your 90 second take on things?