What happens when a home does not appraise…

Recently I closed on a home that did not appraise. It was a 2 story, 4 bedroom, 2.5 baths with an unfinished basement. It was listed for $214,900. The buyers, my clients, made an offer of $206,500. The sellers countered at $209,900. My buyers accepted the counter offer.

The next step for my buyer’s mortgage company was to get the appraisal done. The appraisal came back at $205,000. Usually this can be a deal breaker. Buyers and sellers have four choices at this point.

1. The seller can agree to reduce the price to the appraisal price. If this is the case, the buyer and seller sign an amendment showing the reduced price and the sale goes on. Sometimes a seller can not afford to reduce the price. It might mean having the sellers bring money to the closing table to do the deal. The sellers need enough money from the sell to pay off their existing mortgage on the home. Otherwise the sellers cannot sell the house. Maybe the sellers don’t have the money to bring.
2. Re-negotiate the deal. In my deal we were $4,900 above the appraisal. If the sellers were not willing to reduce the price, maybe they would split the difference. In other words the seller will be willing to sell the house for $2,495 less and the buyer would be willing to pay $2,495 more for the house. The house ends up selling for $207,495 and the buyer has to bring $2,495 more than the appraisal to closing. It does not have to be split 50/50. Anything that the buyer and seller agree to will work out as long as the price of the house is the appraisal price or higher. Sometimes this does not work. Maybe the buyer refuses to buy the house for more than the appraisal price. If the buyer only plans to live in the house for one or two years, they may not want to pay more than the appraisal. If the buyer is planning to live in the house for 10 or more years and really wants the house, they are more likely to pay more than the appraisal.
3. Contest the appraisal. This is the most difficult choice in my experience. It also has to be contested by the buyer. Their Realtor can help them out with comparables in the community, how to read the data what will make a house more valuable BUT the buyer has to put the pieces together on their own.
4. Walk away from the deal. The buyer may not budge from the appraisal price. The seller may not budge from the agreed upon price. They both walk away from the deal. The purchase agreement states that it is contingent on financing. The appraisal is a part of the financing. If neither one wants to negotiate it, then they can sign a mutual release and it is like it never happened. The seller might then take their house off the market thinking that they will never get an appraisal for what they want for the house. They may leave the house on the market thinking the next buyer may get an appraisal higher than the last one (possible but not probable). The seller also could hope for a cash deal which does not require an appraisal. Although there are now significantly more cash deals today than three years ago, the likely hood of a cash deal above $200,000 are slim. Most cash deals today are far below $100,000.

All though the Loan Officer wanted to contest the appraisal, after I did a lot of research, I came to the conclusion that it was a fair appraisal. What was unusual with the appraisal was that it looked at comparables as far back as one year. Typically appraisers only go back six months. The other thing that was unusual was that the appraiser used four comparables. I am use to only three.

When I looked at two story, 4 bedrooms, 2.5 baths with basement that sold in the past year in Royal Run, I came up with 16 listings. The top 2 sold for $233,000 and $234,000 and were much bigger. The bottom 10 were all under $200,000. That left the middle four. Those 4 happened to be the ones the appraiser used in his appraisal. Three were priced between $200,000 and $201,000. One was priced at $208,000. The appraiser’s bottom line was $205,000 which I thought was fair.

As I said before, the buyers and sellers ended up splitting the difference. The house sold for $207,495 and we closed the deal. Everyone was happy.

Stratford Glen

Went to a Brokers Open today in Stratford Glen and saw 3 nice houses. All 3 priced below $125,000. All 3 houses were well maintained and in my opinion were bargains. It is so nice to see pride of ownership.

House of the Day

Nice ranch in Deer Creek with an excellent floor plan. 3 bedrooms and 2 full baths. This 22 year old house has 1658 square feet. Fenced back yard with large deck and a screened in porch. New windows, new paint and flooring, new kitchen appliances and new lighting fixtures. Double sided wood burning fireplace. I had seen this house last year when it needed rehabbing. The owner did an excellent job an I almost did not recoginize it. Priced under $110,000. Call for more info or a showing 317-319-9012.

2011 Pike Township Real Estate Recap


140 Condos sold
142 Average days on market
$78,617 Average sale price
1446 Average square footage
$53 Average $ per square foot


707 Homes sold
102 Average days on market
$133,265 Average sale price
1908 Average square footage
$69 Average $ per square foot

847 Total Condos and Homes sold

Distressed Sales*(Included in above numbers)

254 Homes and Condos sold
79 Average days on market
$74,732 Average sale price
1734 Average square footage
$41 Average $ per square foot
$20,000 to $800,000 High/Low price range
34.59% of sales in Pike were distressed

*My definition of "Distressed" is 
Bank Owned, Bankruptcy, Foreclosure,
HUD, Short Sales, Pre-Foreclosure and

Numbers taken from MIBOR's Broker Listing Coopertive 
Information Deemed Reliable But Not Guaranteed

Help for Community Associations and Homeowners

With more than 60 million Americans living in 315,000 U.S. homeowners associations and condominium communities, tension, frustration and conflict are inevitable.

Associations can face a range of problems—from financial strife related to the current economic climate and housing crisis to conflict between homeowners and association leaders. Issues can involve mandatory homeowner fees, budgetary shortfalls, home foreclosures, architectural guidelines and rules enforcement related to yard signs, holiday decorations, flag poles, pets and parking.

Fortunately, there is free help and information—for homeowners, association leaders and community managers.

The nonprofit Community Associations Institute (CAI) offers free, downloadable information that can help homeowners better understand how associations should function and how to improve communities that are failing to meet resident expectations. Included are:

• An Introduction to Community Association Living—an online presentation that explains the nature, obligations and benefits of living in a common-interest community.
• Rights and Responsibilities for Better Communities—42 principles and practices to help associations promote harmony and reduce the potential for conflict.
• Community Association Governance Guidelines—12 principles that can help association boards identify and meet basic benchmarks of responsible governance.
• Model Code of Ethics for Community Association Board Members

By knowing your rights and the rules and regulations of normal homeowners associations, you can know what to expect and better your living situation.

For more information, visit www.caionline.org.

House of the Day

A beauty in Branch Creek. Built in 1997 this 2 story, 4 bedroom and 2.5 baths sits next to a very tranquil pond with an awesome view. Totally updated and remodeled. New counter tops, new roof and new carpet throughout. With 2202 square feet there is plenty of space. Price is under $150,000. Call for more info 317-319-9012.