What to do when the bank appraisal comes lower?

you can also go to a different bank and go through the same process.

my friend has 2 identical apartments on the same floor. when she was doing a refi, one of them (idiot for sure) appraised the apartment at 20% lower then the other. he was using comps of apartments that were in 100% with flip taxes of 20% and of apartments that were a few blocks away from projects. all of his comps were 12+ blocks away from the train vs my friend's apartment being only 4.

or you can get mortgage based on $935k and pay addl $65k in cash - if you have the money.

Or you can tell the seller that you are going to walk away if they don't agree to lower the sale price to $935K and see what happens. If they're motivated, they will do it because it will take a lot of time to get back into contract and then who knows what the next appraisal will say.

Bullish

if the appraisal comes higher, will you pay more to the seller????

three choices,

try another lender
put up a larger down payment
consider if you are over-paying

Call the seller's bluff. Use it to your advantage.

Why?

clsm, why can you walk away from the deal? Have you not signed a contract yet?

walk away.

the bank is telling you that you overbid. say "thank you!"

in my experience, many appraisers undervalue properties in order to be conservative

Walk away...unless the seller is confident that he/she can find an all-cash buyer for the property, then they should understand that they may have this problem with future offers. Threaten to walk and see if you can get the price down.

Questions to ask:
1) How long have you been looking?
2) How well do you know the sub-market?
3) How did you arrive at your initial figure?
4) What does your own analysis of the comps say?
5) How easy is it to find a true comp?

If this is a big building where a similar line of apartment comes on the market several times a year, move on unless the appraisal is obviously "off" from other comps in some way. If your initial figure was heavily pushed by your realtor, move on. If you are new to the area, move on.

That said, if you've been looking for a long time and are convinced this place has a unique combination of features that are important to you, I'd consider putting up additional down payment. I'd probably at least try to split the difference with the seller, though.

The appraisals I've seen are very sloppy. Two identical units in my building were appraised by different firms. One said the square footage was 750. Another claimed 1,200. Various refinances in my building have been held up by the appraisers absent-mindedly checking off that units have gas service, which then makes the bank come looking for boiler insurance. Corrected appraisals have to be issued. For one appraiser, it took three tries. First time, he changed heat to electric but forgot to change water heat or stove to electric. Second time, he remembered the water heat but not the electric... Third time was the charm, but he delayed the refi by six weeks.

My unit's square footage measurements were actual, interior wall to interior wall measurements, yet it was compared to stated square footage with StreetEasy as the source. Some of the "comps" were 33+% smaller in reality. It all evened out, though, because one comp had a 700 square foot yard that was input as a 7,000 square foot yard, which resulted in a big downward adjustment of the selling price.

In short, appraisals are often sloppy and poorly done. Take a critical eye to yours, but be willing to accept the truth, if it is in fact the truth.

"in my experience, many appraisers undervalue properties in order to be conservative"

In my experience, the appraisers are properly valuing properties. It just means the OP overpaid.

I am closing on an apartment next week where the appraisal came in $2,000 above purchase price.

If I had listened to the broker when he told the sale price was "an incredible deal", I would have been in the same position as the OP.

Do your own diligence when pricing an apartment with the understanding that banks are appraising conservatively in these times. Make your offer accordingly.