4 ms·

Not assuming that at all. I'm saying that if the appraisal doesn't go through, then the lender won't cover the remainder of the purchase price, and then the buy

Not assuming that at all. I'm saying that if the appraisal doesn't go through, then the lender won't cover the remainder of the purchase price, and then the buyer will have to make up the difference out of his/her own pocket. At that point, I'd bail, because the appraiser is raising a red flag. But since you mention it, in the slower market being discussed here, I would definitely not waive an appraisal contingency.

s1artibartfast 5y ago
sure, the appraiser is always providing the buyer a service by giving them an accurate appraisal (more information is better). If the buyer chooses to proceed, this can be a financial disadvantage reducing access to a highly leveraged loan.
corrral 5y ago
> At that point, I'd bail, because the appraiser is raising a red flag. The point is, in a lot of markets, if you bailed on offers over this in the last couple years, you wouldn't be winning any bids in the first place, and wouldn't have been able to buy a house at all. The winning bids include guarantees that the buyer will cover the difference. If you won't do that, you'll lose to an all-cash offer from someone who will. If you're lucky, you won't be competing against superior offers that also waive all contingencies. I have no idea where all these people are coming from with hundreds of thousands in cash and the ability to cover several thousand more on top of the appraisal value, but they seem to be involved in damn near every sale the last 2ish years. Given how many are OK waiving inspections and such, I have to assume they're institutional buyers who can spread that risk around, not individuals who could be ruined by that kind of thing.
- s1artibartfast 5y ago
  Counterpoint: as home prices keep climbing, many of the kind of things that would be caught by a home inspection become less and less financially relevant. When you're buying a million dollar house, 20K for a new roof is in the noise
- otterley 5y ago
  Something seems a bit off, then, because if the market is appreciating, then the appraisers should be taking that into account. As another commenter said, they were certainly doing that in hot West Coast markets like SF and Seattle. Both houses I purchased (each in those locations) appraised at the contract price, and I bought them both within the last 7 years.
  - corrral 5y ago
    They do, but it lags. If prices are going up fast enough, given the way these things are determined, it can easily be the case that damn near every house isn't appraising at what it sells for. The "solution" to this, in the run up to the '08 crisis, was for appraisers to "help out" by fudging their figure to make it match the sale price. I know this because a real estate agent whose husband was a loan officer, told me so. "I know they were just trying to help out with these new regulations, but it's had the unintended consequence that appraisers can't fudge their numbers slightly higher to match an offer that's only a couple percent above the natural appraisal, like they used to". LOL, yeah, the exact thing they were trying to accomplish was an "unintended consequence". Talk about not being able to understand something because your paycheck depends on it. Possibly some appraisers in at least some markets have figured out ways around this, and are back to fudging numbers. I dunno.
    - s1artibartfast 5y ago
      It comes down to what the appraiser is really saying with their appraisal. Are they saying that in today's market this is what the house could go for or are they predicting the future value outside of a bubble
  - sokoloff 5y ago
    “Appraised at contract price” tells you how a bit about how grimy that process (that you’re paying for) is. My appraiser (on a refi) was walking around the house with me and basically asked what I thought the place was worth. That was what it appraised for. (The contract price on an original sale has the same property: what the buyer thought it was worth.) Ideally those are tethered, but the appraisals didn’t give me a great sense of independence.

s1artibartfast 5y ago

sure, the appraiser is always providing the buyer a service by giving them an accurate appraisal (more information is better). If the buyer chooses to proceed, this can be a financial disadvantage reducing access to a highly leveraged loan.

corrral 5y ago

> At that point, I'd bail, because the appraiser is raising a red flag. The point is, in a lot of markets, if you bailed on offers over this in the last couple years, you wouldn't be winning any bids in the first place, and wouldn't have been able to buy a house at all. The winning bids include guarantees that the buyer will cover the difference. If you won't do that, you'll lose to an all-cash offer from someone who will. If you're lucky, you won't be competing against superior offers that also waive all contingencies. I have no idea where all these people are coming from with hundreds of thousands in cash and the ability to cover several thousand more on top of the appraisal value, but they seem to be involved in damn near every sale the last 2ish years. Given how many are OK waiving inspections and such, I have to assume they're institutional buyers who can spread that risk around, not individuals who could be ruined by that kind of thing.

s1artibartfast 5y ago
Counterpoint: as home prices keep climbing, many of the kind of things that would be caught by a home inspection become less and less financially relevant. When you're buying a million dollar house, 20K for a new roof is in the noise
otterley 5y ago
Something seems a bit off, then, because if the market is appreciating, then the appraisers should be taking that into account. As another commenter said, they were certainly doing that in hot West Coast markets like SF and Seattle. Both houses I purchased (each in those locations) appraised at the contract price, and I bought them both within the last 7 years.
- corrral 5y ago
  They do, but it lags. If prices are going up fast enough, given the way these things are determined, it can easily be the case that damn near every house isn't appraising at what it sells for. The "solution" to this, in the run up to the '08 crisis, was for appraisers to "help out" by fudging their figure to make it match the sale price. I know this because a real estate agent whose husband was a loan officer, told me so. "I know they were just trying to help out with these new regulations, but it's had the unintended consequence that appraisers can't fudge their numbers slightly higher to match an offer that's only a couple percent above the natural appraisal, like they used to". LOL, yeah, the exact thing they were trying to accomplish was an "unintended consequence". Talk about not being able to understand something because your paycheck depends on it. Possibly some appraisers in at least some markets have figured out ways around this, and are back to fudging numbers. I dunno.
  - s1artibartfast 5y ago
    It comes down to what the appraiser is really saying with their appraisal. Are they saying that in today's market this is what the house could go for or are they predicting the future value outside of a bubble
- sokoloff 5y ago
  “Appraised at contract price” tells you how a bit about how grimy that process (that you’re paying for) is. My appraiser (on a refi) was walking around the house with me and basically asked what I thought the place was worth. That was what it appraised for. (The contract price on an original sale has the same property: what the buyer thought it was worth.) Ideally those are tethered, but the appraisals didn’t give me a great sense of independence.