Anybody bought at house without an appraisal contingency?

[Anonymous]

Anonymous wrote: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.

This is very true. Appraisals are just as much for the buyer as the banker. However, a home is still worth what you're willing to pay for it. I wouldn't go without it though.

[Anonymous]

Anonymous wrote: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.

This advice is right-on. We bought last year. List price on the house was 500K. We offered low, based on the fact that my realtor thought the home was overpriced majorly. But we LOVED the house and had been looking for a year. We eventually negotiated an contract price somewhere in between list and our offer. Our realtor told us that, right now, appraisals are coming in WAY LOW. Across the board, in expensive homes, in not expensive homes. the foreclosures all around are completely screwing up the comps, and what's more, the lenders, appraisers, and real estate agents are not allowed to communicate in certain ways anymore, so nobody knows one another and you can sometimes end up with an appraiser from, say, Baltimore, coming down to appraise your home in Mount PLeasant and getting crazy sticker shock. This is what happened to us. Our appraisal came in a full 40K lower than our contract price. THANK GOD we had an appraisal clause, because your earnest money and other issues are going to be caught up in it (and if you DO want to look attractive to a buyer, throw a large, large amount of EMD into the mix -- to my mind that will get their attention more than the no appraisal clause will). Anyway, we eventually agreed to meet halfway and come up 20K, but our lender would NOT ALLOW US to do this! And we had 20 percent down and near-perfect credit ratings. So the seller ended up coming down even further. The thing is about other offers is.......there are other houses too. We got ours, and I love it, but life would have gone on if we hadn't.

Good luck! It's so frustrating to wrangle over things when you really like a house. Remember that the seller's agent has to be honest about HAVING other offers, but does not have to specify -- they might be way low and she / he may be full of shit!!!!

[Anonymous]

To be clear, waiving an appraisal contingency is not the same thing as not having an appraisal. Unless you are paying all cash, I think your lender will always require an appraisal no matter what. The issue is whether or not you can get out of the contract and get your earnest money back if there is an issue with the house not appraising well.

[Anonymous]

Another thing to keep in mind that even with a low LTV, lenders now are looking at the ratio of land-to-dwelling value. My mom just lost a house because of this. On the other hand, if you have a financing contingency, you may be covered in this case.

[Anonymous]

OP Back Again, with an update, in case anybody is interested.

In the end, we decided to go 'middle-ground' with the appraisal contingency. We couldn't really get comfortable with the idea of dropping it altogether, but also felt that we wanted to be aggressive with our bid. So, we went with a modified appraisal contingency, essentially saying that if the house appraised at at least 99% of our offer price, we would not void the contract based on the appraisal.

We ended up getting the house, though we did not have the highest offer (the seller invoked our escalation clause, so we got to see at least one other offer). Of course, it is impossible to know what tilted them in our favor. The modified appraisal? Good financing? 5% earnest money deposit? Doesn't really matter at this point - we are just happy that we were successful.

Now, of course, we wait for the appraisal. Will update once that comes in if anybody is interested.

Thanks for all of the feedback and suggestions. They really helped us to think through the situation a bit more clearly.

[Anonymous]

Anonymous wrote:OP Back Again, with an update, in case anybody is interested.

In the end, we decided to go 'middle-ground' with the appraisal contingency. We couldn't really get comfortable with the idea of dropping it altogether, but also felt that we wanted to be aggressive with our bid. So, we went with a modified appraisal contingency, essentially saying that if the house appraised at at least 99% of our offer price, we would not void the contract based on the appraisal.

We ended up getting the house, though we did not have the highest offer (the seller invoked our escalation clause, so we got to see at least one other offer). Of course, it is impossible to know what tilted them in our favor. The modified appraisal? Good financing? 5% earnest money deposit? Doesn't really matter at this point - we are just happy that we were successful.

Now, of course, we wait for the appraisal. Will update once that comes in if anybody is interested.

Thanks for all of the feedback and suggestions. They really helped us to think through the situation a bit more clearly.

good for you! sounds like you were aggressive, well-researched, and enthusiastic. let us know how it turns out!

[Anonymous]

I hope it is smooth sailing from here on out.

I don't envy you packing or the move!

[Anonymous]

OP Back with our appraisal update.

Would you believe that the appraisal came back at 99.1% of our offer price? Almost the worst result we could have gotten, since we remain contractually bound to the offer price, but are paying almost the full amount over appraisal that we put at risk. It has been a few days since this news came in and I think I am becoming more okay with it, but initially I was pretty upset - and regretting that we had modified the contingency. Now I am trying to look at it from the perspective of what I would have done if we did have the full appraisal contingency but the seller refused to come down on price, which my agent thinks would have been the case. Would we still have paid? Maybe. Probably. So there is a part of me that thinks that the strategy was maybe a good one, but I would be lying if I said it didn't sting, at least a little bit!

Now we move toward closing in a few weeks. This is our first home, so that in itself is exciting! Thanks again for all of the advice provided!

[Anonymous]

What if in your offer you stated a 20 percent down mortgage but after the appraisal came back and stated the market you were buying in is declining and the lender now require 25% down, where are you left? are you able to walk away and get your deposit back?

[Anonymous]

OP, if you are planning to live in the house for a long time, I would no worry if the house appraises a less - even significantly less - than you paid. Arlington is a pretty safe bet with real estate and by the time you have to sell, $50k will probably look like chump change.

[Anonymous]

Anonymous wrote:OP, if you are planning to live in the house for a long time, I would no worry if the house appraises a less - even significantly less - than you paid. Arlington is a pretty safe bet with real estate and by the time you have to sell, $50k will probably look like chump change.

This is good advice. What got people into trouble was forgetting that your home is first a place to live and secondly an investment. Congratulations!

[Anonymous]

appraisal? I guess if you are all-cash buyer you could, otherwise your lender will require one anyways. You have to provide 20% equity of the appraisal value (not price).

and definitely get a home inspection, things to fix up could be worse than you already anticipate or there could be a surprise to the downside (hidden serious damage).