Anybody bought at house without an appraisal contingency?

[Anonymous]

Anonymous wrote:OP Here: Yes, we do have the cash to make up the difference if the house doesn't appraise, but I am worried about paying over the value. My agent has suggested that we are in a rising market (North Arlington) and that appraisals can 'lag', but I'm not so sure.

I wouldn't listen to your agent on this--if anything, talk to the appraiser and find out specifically what it was that kept the house from appraising to value--it might be something easily remedied. Our house was close but didn't appraise, but we felt better after talking to the appraiser who said it was a very difficult appraisal and that doing the updates that we were already planning would definitely be worth it. Our house also has some aspects that are going to be valuable to some buyers and not others (view, larger backyard than most homes in our neighborhood), so we know that down the road it might take a little while to find a buyer who values those things and is willing to pay.

But agents are only concerned about making the sell, period. They are not your friends. Don't let the agent gloss over something important like this.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP Here: Yes, we do have the cash to make up the difference if the house doesn't appraise, but I am worried about paying over the value. My agent has suggested that we are in a rising market (North Arlington) and that appraisals can 'lag', but I'm not so sure.

I wouldn't listen to your agent on this--if anything, talk to the appraiser and find out specifically what it was that kept the house from appraising to value--it might be something easily remedied. Our house was close but didn't appraise, but we felt better after talking to the appraiser who said it was a very difficult appraisal and that doing the updates that we were already planning would definitely be worth it. Our house also has some aspects that are going to be valuable to some buyers and not others (view, larger backyard than most homes in our neighborhood), so we know that down the road it might take a little while to find a buyer who values those things and is willing to pay.

But agents are only concerned about making the sell, period. They are not your friends. Don't let the agent gloss over something important like this.

OP Again. I don't think that we can get an appraisal done before we have to make this decision, especially since we already have an offer in and are just considering modifying it because we want to be more competitive.

[Anonymous]

If you buy a house, it is because you are prepared to pay more money for it than anyone else in the world.

Everyone gets buyers remorse, and wonders if they could have got the house for a few grand less.

If you really want the house, and you have the cash to cover any deficit, I would drop the appraisal contingency.

After all, the appraisal doesn't really tell you what the house is worth - it is the price it fetches on the open market that tells you that.

[Anonymous]

I would not drop the appraisal contingency - if the sellers think the house is worth what you are offering it will not matter to them that teh clause is there and there is always the option of getting a second appraisal done. If they think you are over paying, they might be more than happy to see you drop the appraisal contingency clause (but then you are over paying and probably substantially if you are being pushed to drop this clause).

[Anonymous]

We've done it twice, and it did help us get our first house in a tight market. Both times we were buying with cash, so it didn't really matter what the house appraised at as we felt the house was worth somewhere around what we were paying. It seems like a reasonable contingency to drop provided you have the money to make the deal work.

[Anonymous]

PLEASE people for the sake of ALL of our property values and the health of the realestate market, please do not get wrapped up in this kind of frantic and unhealthy buying behavior. As you should already know, what goes up WILL come down and hard.

[Anonymous]

We did it in 2006, but I definitely wouldn't do it now. If your agent is telling you that appraisals lag, s/he is basically warning you that it will not appraise at the higher value (CYA on agent's part).

[Anonymous]

"10:57 - I would be HORRIFIED if we paid 762K and the appraisal came in at 700K, even though we would have the cash to make up the difference. I don't think that it would end up this extreme, but I could imagine the appraisal coming in below $740K, which would still be a big hit. How did things work out for you with overpaying initially? Have you regained the value? Like you, it is important to us to get this house. "

We bought in 2004 so we did get the 30K back but only because 2005/6 went up enough to counter the big bust a few years later. We just refinanced and the appraisal came in at 3K more than we purchased in 2004. We are OK with this for reasons that are specific to our situation.

*I made much more than I expected on the sale of my condo in 2004 and we paid down a significant portion of the house to get a low interest rate and lower monthly payment. If we had to sell tomorrow while I would technically take a small oss if we sold at the exact appraisal value and factored in the realtor commission, we would still walk away with most of what we put into the house pluse the 6 years living there and the tax benefit.

*We expect to be here for at least another 5-10 years and the market will probably go up but not to the extreme levels we saw in the boom.

*The "what if" is not exactly relevant as so many other things would have changed. The best "what" if for us would have been selling the condo in 2005, renting until the bust, and buying now. I'm not a psychic so we could have ended up stuck in our condo with two kids if we waited too long until after the market burst. We also probably would not have rented in the area we are live in now and so many things would have been different..different nanny, different preschools you name it. DH left a job he was lukewarm about because the commute to our new house was so bad. If we had rented we would have rented closer to work. He probably would not have left if the commute had not been so bad. He loves the job he has now.

While I don't agree with the statement you should not buy a house unless you love it so much you would be fine paying way, way overmarket, I do think you need to weigh what 20K means to you overtime. People became used to the idea that when you buy a house you start racking up 10-20% in equity every year and its a money maker for you. This was not always the case. It used to be that people hoped for their house to appreciate enough to cover the real estate commission and maybe have a little left over toward the next downpayment. People factored into the amount they would pay in rent against the mortgage and tax benefit rather than the windfall they would make selling in a few years.

[Anonymous]

Bad idea to drop appraisal contingency. Even if your LTV is very low, bank may not fund the loan if the property does not appraise for contract sales price.

[Anonymous]

We just did this for the house that we bought about a month ago. We were also in a multiple bid situation. We were comfortable doing this because we were putting 40+% down and really really wanted this house. We had to do an appraisal anyway, for the lender, and it appraised right at the purchase price.

[Anonymous]

I wouldn't do it. I think that your agent is not working in your best financial interest here. Home inspections and appraisals are meant to protect the buyer from buying something that is not worth the price tag. Do NOT do it. There will be similar homes out there in weeks to come.

FWIW, we recently bought a house in NW DC in a multiple bid situation and although we were not the highest bidders, we were the most financially stable--and we kept the home inspection and appraisal clauses. Financial solvency was the most important thing for the sellers, who were moving and needed to sell their home.

I don't know what the sellers' situation is in your case, but it sounds like you are very financial sound, and if you are willing to put in a high good faith deposit (we put in $50K), you are going to be very attractive to the sellers.

[Anonymous]

We did this in 2004 when it was the norm to have zero contingencies, esclations and numerous offers to compete against. We still did not offer above what we, ourselves, thought the house warranted. We have not lost any $ on it and it is still worth more than we paid.

We bought a house last Sept...in a tight market with multiple contracts, low inventory (yes still happens here) but we did have some contigencies this go around. We did keep the appraisal conting. (I think our loan required it)--but we also were told that funny things were happening with appraisals at that time..since after the mortgage crisis things got stricter appraisers that were liable had recently even been a bit 'under-appraising'. I don't think it is so wise to do these days. We did not have a termite or home inspection contigency..but we had a contractor friend of ours go thru it with us the day we first saw it and he is the best guy out there (knows more than our prev. home inspector). Even with this--we beat out the other 2 offers which were also for asking because I think we looked the best financially on paper.

[Anonymous]

The buyers of our condo waived the appraisal contingency, and the placed appraised at 5k less than our contract price (this was two years ago, when prices were dropping). They didn't have the cash to make up the difference so they had to convince their lender let them finance the difference. Ultimately, that happened, but it took some work on their part and delayed the closing several times. We could have afforded to drop the price if they'd asked us to in order to go forward with the sale, but luckily we didn't have to.

[Anonymous]

Under-appraisals are happening all over. A house is worth what a willing seller and buyer agree it's worth, so if it's a fair price to you, that's the answer.

[Anonymous]

Anonymous wrote:PLEASE people for the sake of ALL of our property values and the health of the realestate market, please do not get wrapped up in this kind of frantic and unhealthy buying behavior. As you should already know, what goes up WILL come down and hard.

What is "frantic and unhealthy" about someone wanting the right house for them? Multiple-bid situations are more and more common in this market. In some desirable areas of the DC Metro area, there are less than 4 months of inventory, so the good properties are going to end up in these situations.

You sound like a bitter buyer on the sidelines who is pissed that the housing bust still means that they can't afford to buy in the area. Newsflash: That well-maintained 4 bed colonial in North Arlington will never come down to 300K, no matter how much you whine on the internet.