What to do when an appraisal comes in low

u r dreaming
the buyer just got a big signal that they are making a fool of themselves
the appraisers do their darndest to make the apt appraise at the selling price
when they cant they signal this by being a bit off
I would seal the deal as quickly as possible or you will regret it

I agree with joedavis that in the past appraisers try to make the apt appraise at the selling price. However I have not heard of one single apartment appraising at the contract price in the last 4 months (in my realm of friends transactions, word of mouth and reading.... not that it is that many). I think this is fairly understandable as no appraiser wants to go out on a limb, additionally they are forced to deduct an additional 5% off the value in Manhattan at the moment (for protection in case the market continues to decline).

Furthermore they are so square footage orientated that they don't take into account as much other features that buyers might value more, like additional windows and light, I have even seen terraces called an "amenity" without a value attached.

Interestingly I have also seen 10% variations from different appraisers on the same apt and depending on the specfic banks policy they often take the lowest one.

I suspect your broker is very aware of this, and has assessed that it is easier to get the $10,000 off you rather than the buyer.

Having said all this, I don't know your specific history on this transaction, like how many other offers, how long on the market, do you need to sell and how would you feel if the deal fell thru ? If I went this way I would most certainly be after the broker to make a contribution of there commission, instead of it all falling on you to make the deal happen.

I agree
Definitely your broker should have a contribution to make the deal go through
Also if you dont need to sell you can dictate the terms as you want
On the other hand, given all the projections for prices in the next 4 years, if you need /want to sell, this is a small amount to deal with now and it is best to get it done

Why would an appraiser even be given the negotiated price? I remember going with a friend to Macy's to have an engagement ring appraised and the appraiser asked my friend how much he bought it for. I jumped in and said to the appraiser, why don't you tell us how much it's worth and then my friend will tell you if he got a good deal on it.

Any way, is this thread really about a 10K difference? A zero is missing right? If not, and you're the seller, I would not count on the buyer closing, even if you renegotiate. Any buyer who would consider a $2-3K difference to be a deal breaker can't be counted on to close. With that said, do negotiate with the buyer, just have a solid plan B in place.

The appraisal came in under contract and you seriously think that's the BUYER'S problem?

It's your problem. If you're serious about selling, lower the price to get the deal done. Probably not unreasonable to ask your real estate agent to chip in a portion of it.

ali r.
DG Neary Realty

let the broker take it out of their fee

What should you do now? You should lower the price and get on with it, or you are not going to sell for a long time.

Appraisers do everything possible to make property appraise to the contract price. If you scuttle this deal, your next buyer is going to have the same problem as this one...but by then, prices will have gone down.

I actually don't agree that the money should come from the broker's commission. Unusual position for me, but in this case I wouldn't cooperate with that. After all, the broker did a terrific job for you, getting an over-market price, and I don't see why the broker should have to take a hit for doing a terrific job.

{Manhattan real estate agent.}

Hi, upon reading the question more closely... "$10 K lower than the contracted sale price". If in deed there is a signed contract, assuming there is no mortgage contingency clause, then I don't understand what the problem is for you as the the buyer is already in a contractural agreement, which includes the price.

If there was a tight mortgage contingency clause, then I don't think the broker did a "terrific job" in the negotiating for you( ie if the buyer can't pass a mortgage) if your apt had to appraise at exactly the appraisal and or give the buyer the ability to get an 80% loan (instead of at most 70% loan in this apt) at 6% rate or below for the deal to go thru.

Assuming there is no signed contract or enforceable contract because of mortgage loopholes left in the contract then....I do understand what the other writers are saying, that relatively it appears a low proportion of money to get the deal done from everyones point of view and I know I wouldn't like to lose a deal about it. I also bet your broker wouldn't want to lose it and have to keep up the expense of advertising, doing open houses, and risk getting nothing by you listing with another broker if it doesn't go thru. I would be talking to your broker now..what other people are around ?, what you would like them to contribute, perhaps .5% from both brokers, even .25% from both depending on the price of the apt. What feels fair to you... do you think the broker got a great price in this market?

Wisdom of Solomon: seller gives up $5 & broker gives up $5.

Our appraisal came in a couple hundred thousand under what we went into contract for 2 years ago. Sponsor offering 5 percent reduction still leaving us with a 100,000 plus gap. We should walk right?

SellingonUWS, what percentage of the actual price is 10k out of curiousity. It is rare these days to see an appraisal come in on the dot. As a broker I explain to potential buyers this in adnance, and make sure that if it is within a reasonable amount they are willing to make up the difference and can afford it. Then I have them put it in the contract in advance. Another reason for this is that if you alter the terms of the contract after the fact sometimes the board looks at it funny, they want to keep prices as high as possible for their investment, and any "tampering" with the contract may be interpreted as funny. Having said that, it may be too late now, so I would be reasonable and try to have all parties throw in some to just push the deal through.

'Wisdom of Solomon: seller gives up $5 & broker gives up $5."

Actually I think Solomon would say 3.33 seller, 3.33 broker, 3.33 buyer.

In normal times you could maybe bully the buyer to cough it up as they have something invested already in bank fees, and maybe lawyer fees.
But in these times, take the .98% bird in hand if the broker and buyer hold firm.
Doesn't hurt to ask, but I wouldn't insist.

Actually, 10K really isn't a big deal. I've seen much worse but this isn't my apt. or my sale so I guess I'm being bias.

nycbrokerdax, you make some excellent points.

truthskr10- I think you have a great formula. Good luck.