When dealing with bank owned homes, we typically represent buyers and not carry the listings – except for some local banks – and it can be challenging for buyers and brokers to deal with decisions outside our control. As recent as this week, I was working with a Navy Chief who wanted to purchase a home in Lake Stevens. Everything was going great; the home inspection was complete and the appraisal had been ordered and this is where the problems arose.
During the appraisal, I was asked to provide comparable properties substantiating the buyer’s purchase price. I had a feeling this would arise because the home was/is the highest priced in the neighborhood. Not being totally unprepared, I proceeded to find 3 comparable properties for the appraiser but that effort didn’t help and the appraisal came in really low.
With Fannie Mae, if an appraisal comes in below the contracted price contract the buyers then have to submit a request to change price form. The change of price form and appraisal was submitted to the listing agents and the response received was:
After crunching numbers the buyer’s offer was resubmitted, and feeling pretty good at our efforts and eager for a response, we received:
Shocked would have been an understatement. With a low appraisal there are usually more opportunities to negotiate out the details without just terminating a contract with the main being:
1. Can the buyer pay the difference between the appraisal value and offering price.
With no opportunity the buyer’s disappointment mounts and yet the story doesn’t stop there. The home comes back on the market with a huge price reduction – 28k – which signifies the seller acknowledgement that the house was grossly over priced. Now, if the buyer still wants the home they will have to submit another offer and compete with the other buyers, again. So that is what we did and after a weekend of waiting the seller’s response was:
This is not the response we were looking for. Not satisfied with loosing I dug around some more to find out the seller is negotiating with another buyer. Evidently the offer being countered wasn’t the asking price.
So what is the buyer to do at this point? 1. Fire me and hire someone else, 2. find another home or 3. go a head and rent. The 3rd option is what the buyer has decided. Very disappointing scenario yet not uncommon.
The buyer was out their home inspection and appraisal funds with no recourse. It is a shame, a complete shame, and the when an government agency just ups and cancels the contract because they don’t want to negotiate then there is nothing we can do. It appears that the asset manager just wants easy transactions and is unwilling to go above and beyond to make the deal work.
I’m looking for a lesson here but I cannot think of one. Was this all just an educational experience or was there something else that could have been done?