From: krw 
Newsgroups: misc.consumers.house
Subject: Re: Bank Appraisal - Selling Price
Date: Wed, 28 Nov 2007 17:34:29 -0500
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In article <1190408018.881584.160140@w3g2000hsg.googlegroups.com>, 
Slain.k@gmail.com says...
> On Sep 21, 4:12 pm, "John Weiss"  wrote:
> > "Slain"  wrote...
> >
> > > The home inspection further revealed problems with septic etc and we
> > > brought up those issues. The final nail was the bank appraisal, which
> > > came up to be the exact price as the mortgage that is 295k. Further,
> > > the appraisal says that the house is in need of no renovation or
> > > repair due to the recent changes. How ever the house is in not so good
> > > shape and the reason they had agreed to let go of about 50k was
> > > because of the repairs it needed.
> >
> > OK...
> >
> > The seller originlly thought it was worth $345K, but agreed it needed $50K
> > of repairs to make it REALLY worth that, and so the 2 of you agree it is
> > now worth $295K.  The bank appraiser agreed that it is worth $295 in its
> > current condition.  What is the problem?
> >
> > The inspection is designed to point out to the buyer the repairs necessary
> > to bring the house up to a certain standard.  Most contracts for house
> > sales have a contingency clause that allow the buyer to back out if the
> > inspection reveals major defects in need of repair.  So, you can either
> > accept responsibility for the deftcts and eventual repairs, based on the
> > original price and inspection report, or renegotiate the price if you
> > believe the defects are more than were revealed prior to the inspection, or
> > back out of the contract based on the inspection report.
> >
> > > Talking to the bank person, her point was the appraiser just tries to
> > > get the mortgage loan approved. And he assumes or overlooks the parts
> > > which are in need of repair as other wise the appraisal would be lower
> > > than the mortgage and hence, we wont be able to get a bank loan
> >
> > It is indeed true that the appraiser works for the bank (even if you pay
> > the cost of the appraisal), because the appraiser looks out for the bank's
> > interests.  An appraiser that consistently appraised property for less than
> > the selling (or mortgage) price would soon be out of a job, since no bank
> > would hire him.
> >
> > So, though there is DEFINITELY a conflict of interest here, it is common
> > and accepted practice.
> >
> > > This make me think if the house was over priced in the first case. I
> > > understand the bankers reasoning, but it means that in some ways I am
> > > paying for the house to be completely fixed which is about 30k worth
> > > of expenditure.
> >
> > So, would you rather have the current owner pay $30K for repairs, then you
> > buy it for $50K more than the current contract price?
> >
> > Again, what is the problem here?  You have a good-faith estimate from the
> > inspector of what needs fixing, you have a ballpark estimate of the cost of
> > the repairs, and you have an appraisal of what the bank is willing to lend
> > you for the house in its CURRENT, UNREPAIRED condition.
> >
> > > How much weight age should be put on the bank appraisal. It almost
> > > seems like they made the appraiser actually bump up the appraisal. Any
> > > thoughts?
> >
> > Talk with your realtor to find out if [s]he agrees that the house is worth
> > what you are paying for it.  If in doubt, approach another realtor for a
> > second opinion.  If REALLY in doubt, hire your own appraiser for an
> > "official" second opinion.
> >
> > BTW, what does the govamint say the house is worth in its tax assessment?
> 
> Well the house is assessed at 267k. The reason for this problem is
> that if the house is over priced then our negotiation does not really
> make much sense.

But the appraiser agrees and says it's worth 295K (that's what he's 
for) in its present condition.  I don't see the issue either.

> And the Appraiser says that the house is worth 295k if everything was
> fixed. Hence the problem is that we feel the current price of the home
> is 295k - cost of repairs.

No, he's telling the bank that it is really worth $295K and their 
money is "safe".

> So I would rather have the owner cut back the repair of cost from the
> appraisal.

That's not the way it works.  The appraiser is simply telling the 
bank that the property is worth what they have agree to loan 
(considering your down payment, LTV, etc.).  Appraisals may come in 
above the selling price, but not usually.  It sounds like you want 
your cake and eat it too.

-- 
  Keith