Low appraisal?

Renovations don't really affect the appraisal value as much as location and the building itself. I can't say what happened in your case, but it's a pretty bad sign about what you are paying if the appraisal is so far off. The reference to the Highline is a stretch since what is happening 2 long Avenue blocks away will not bear much, if at all, on the property values of the building you are looking at. And 2d floor on 8th Avenue is going to be a real issue upon resale. Are you sure you are evaluating the value of this property correctly yourself? Maybe it needs a fresh look.

kylewest makes some good points. Perhaps you really were about to overpay and now you have some solid grounds for renegotiation.

Not that the seller will be happy...

Isn't that your mortgage (if you need one) is dependant on the apprisal value? That means you need to come up with that extra financing if you were to pay the original amount of 750k since the bank is only willing to lend you, say, 80% of 680k.

70k is pretty off but has been more common lately. I would ask your realtor for comps supporting the 750k. You may be able to submit that to the appraiser to justify the value of 750k, IF that value is supported. Unfortunately, the bank goes off the lower of either purchase price or appraisal value. How much were you looking to put down? If you were looking to put 20% down on 750k for a loan of 600k then new the loan to value will be based on 680k, making it roughly 88% financing. Depending on your income, assets, and credit you would still be able to get a 88% financed loan of 600k. sunny_hong@countrywide.com

I have a strange reason. Perhaps the appraiser is actually doing an honest job. It seem that in this climate that people are less reluctant to just put a rubber stamp on properties. It started with the banks. This is another way prices may come down. I have stated that this is the reason New Developments refuse to lower prices. If they lower prices on remaining units say 10-15%. How do people who put a down payment 1-2 years ago get a mortgage on a unit when an identical unit is listed 10-15% below their agreed price. That's why they will give you many other concession. The last thing they will do is lower the price. Once the buildings close the developer will make market adjustments.

Since we're on the topic of appraisals, does anyone know if it is commonplace for the bank's appraiser to appraise the value of an apartment at or close to the purchase price even though the value of the apartment may, in fact, be quite higher? Another way of putting it, since there is no benefit to the bank (or even the purchaser for that matter) to have the property appraised significantly higher than the purchase price, do they skew the appraisal lower (and/or cherry pick comps) to protect themselves and the bank?

Interested to hear people's take.

Well, I commonly find the appraisal value coming in at purchase price when comps are slightly higher. However, if the comps are significantly higher then the adjustments are made accordingly. Banks are reviewing twice now before they are complete.

Well, I commonly find the appraisal value coming in at purchase price when comps are slightly higher. However, if the comps are significantly higher then the adjustments are made accordingly. Banks are reviewing twice now before they are complete. Although a higher appraisal can sometimes be useful if the buyer wants to roll closing costs into the mortgage and stay within LTV limits.

cc3duke99 - There are no lisitings "In Contract" or "For Sale" for that matter, at 85 8th on the 2nd floor...was this done through a broker that does not report to StreetEasy or a FSBO?

You may want to revisit your purchase price per below:

26 previous sales listings: $898 per ft² (avg)
38 recorded sales: $412,000 (avg price)

Isn't there possibly an out here (I'm refering to a new construction situation) if the appraisal value comes in below what the agreed puchase price was. Most new construction contracts have outs in case the buyer can't obtain financing. In the above example, the assessed value was 70K below the purchase price and therefore the LTV was 88%. Presumably the interest rate on 88% financing would be higher (possibly significantly higher) than an 80% LTV situation. My point is, could the buyer maybe succesfully argue that they could no longer afford this higher cost financing, get out of the deal, and get their deposit back?

Alas, most new construction contracts do not have any sort of appraisal or financing contingencies. So if this were to happen, the buyer would need to pay more down they were expecting, or be unable to finance their purchase and lose their deposit.

Jordyn, thanks. My particular experience is with Brooklyn and there is a financing out in my contract, which I understand is pretty common to Brooklyn. I could see this being different for Manhattan since price point are higher, etc.

urbandigs site had an article on this topic not too long ago - a buyer client who's apt was under-appraised and, if I remember correctly, it killed the deal.

I smell lowball!

Typically in this situation you go to the listing broker and ask them to suggest comps to the appraiser (which any good appraiser is going to take with a grain of salt).

However, I'm with Apt_Boy -- I can't find this listing, and so I bet there isn't a listing broker. This smells like a FSBO that might not be in line with the market as a whole.

I hate to comment on situations where there isn't much data, but it looks like in an attempt to avoid paying a 5% or 6% real estate commission, the parties now have themselves in a 10% mispricing situation.

I can't see your contract, but there might be a financing contingency, in which case you can raise a valid case with the seller that you can't get a mortgage and just walk away. (Even if you're not using brokers, please please use an attorney).

Otherwise you'll have to dump $70K in cash into the deal to save it.

On the plus side, paying over market is going to endear you to the co-op board, so you probably won't have any trouble with them.

ali r.
{downtown broker}

Thanks for the comments. It was an FSBO. I came up to 690K and the seller still wanted to haggle (no doubt disappointed with the $60K drop), so I walked. Thank god for mortgage contingencies!

this is direct evidence of the tightening of the mortgage markets, in the form of tougher appraisals. These guys are being watched now, and regulation Im sure is coming for the entire industry. Gone are the days of 'making the #' so everyone vested gets their fees/commissions.

You can try a different bank, but in general, all appraisals these days are done totally independent and the actual appraiser doesn't mess around. The property MUST trade in line with comps/current market. Its a side effect of banks risk aversion. Its a new world out there since last July when credit risk changed completely.

I have had experience with a low appraisal -- it was the result of poorly selected comps, and arrogant appraisal people. I sold the apartment for more than $600K above the appraisal within 6 months. It shows you that the appraisals are often a straight forward mechanistic process by not so bright individuals.

Hi cc3duke99, hope you were able to remedy the appraisal and comps issues.

I'm actually looking to buy an apartment in the building on E15th where you might have lived before and would love to hear your opinion about the location and the building.

Could you drop me a line at vqg_admin[at]gmail.com?

Would greatly appreciate it!