Real NEastate: What if the appraiser says my home is worth less than what the buyer paid?

Q: My house went under contract in Sun Valley two weeks ago. I priced it well and was happy that it sold quickly – and for full price at that. I thought we are in a “market recovery,” like the headlines say. Fast forward to two weeks later when the appraiser came through and told the buyer it is worth $5,000 less than what they want to pay. What can I do about this?

A: Appraisal issues are a recurring complaint by real estate agents and their clients today. If there were actual data to show you how frequently an appraisal puts a monkey wrench in a real estate transaction, it would probably show it’s typical. But, alas, nowhere is recorded the difference between what price a home originally (actually) sold and the end price after getting hammered by an appraisal, that is to say if the transaction even survived the appraisal. We only have the data on how much the buyer paid for a settled transaction.

There is rarely an opportunity to argue with any appraiser and have it come out any differently. Hopefully your agent provided the appraiser with the most accurate comparables, even though the appraiser will find his/her own. But even then, the appraiser’s approach is fairly subjective. It is difficult for appraisers. Since their approach doesn’t recognize a “market recovery,” they are focused only the existing comparables. If the comps aren’t there to justify your price, there’s pretty much nothing you are going to be able do about it. It is what it is.

Unless this is a cash transaction, the appraiser is traditionally hired by the lending institution selected by the buyer. If your buyer has selected an FHA loan (which automatically must appraise), or you signed an appraisal addendum, the only thing you can do is eat the difference. If your buyer has requested seller’s assist with the financing, you might be able to get them to bring more money to the table so there’s less for you to lose. If there is no appraisal addendum or FHA, you can expect the buyer to pay the price they offered regardless of the appraisal, although they may want to negotiate it.

Even if we knew how many houses in the neighborhood have under-appraised, which we don’t, there is nowhere to report this type of information. I wish there was. If we could, then it would be easier to see the big picture of what is really going on with the housing market and how long (or short) the road is in front of us.

Good luck!

Stacey McCarthy is a real estate agent with the McCarthy Group of Keller Williams. Her Real NEastate column appears every Wednesday on NEastPhilly.com. See others here. Read other NEast Philly columns here.