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Bank asked us to lower our offer

Posted by Henry R Morton on March 21, 2017 at 10:54am in Short Sale Discussions

Back in December My wife and I put in an offer on a Short Sale. Yesterday my Realtor advised us that the sellers bank had completed the appraisal (Original loan is a VA loan) and our offer was too high. They advised us to re-submit for $40K less than our original offer. Is this common? Not that I'm complaining about paying less, but I most things I have read, the banks may counter at a higher price. My Realtor said that in his years of short sales this was the first time a bank has asked for a lower offer. Something about Federal Guidelines or something. I honestly can't remember I stopped listening after I heard $40K less :) The realtor did say after they received our new offer that it would go to quality check and we should have our offer accepted in about two weeks. I hope that is true.    

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  • Henry R Morton April 20, 2017 at 6:50pm
    Hi all thanks for all the replies. It's been a month since I posted about this, but a lot has happened. I apologize in advance if this is a long post. However, I wanted to share my happenings. Our offer of $68,000 was approved on 3/23/17. We found out from our first loan officer that the seller's bank appraisal came in at $71,000. This is why we were asked to lower our offer. Yes I said first lender, we switched lenders because the first one wasn't quite honest with us because we thought we were going with a USDA loan, but she had us set up for an FHA with grants that would require us to repay a large sum of money if we sold or refinanced our loan within 15 years. So we moved to a different lender same company, but local to our area so he knew what was more available to us. We did go the USDA route. Anyway back to the appraisal. Realtor advised us that the appraiser was an out-of-towner, and a few things may have caused the appraisal to be so low. First, the home has not been lived in in almost two years so the yard was a mess, paint was peeling, and a couple of broken storm windows. Second, because the appraiser was not from the area they were probably not too familiar with the local comps. Now it was our turn to step up. Since we were going with a USDA loan we had to follow the strict appraisal guidelines for FHA. We had to get special permission from the sellers to access the property and clean up. My wife and I spent an entire weekend both Saturday and Sunday cleaning the yard and we had to replace a couple of broken light fixtures inside the home about $35 was spent out of pocket. My Realtor advised us not to do anything else until after the appraisal because if they find something major and we can't close he didn't want us to lose any more money. The appraisal was on the 7th of April. It was a "subject to" appraisal so we had things to fix before we could close. Such as, peeling paint, broken storm door, broken storm window, and broken outside light fixture. She also noticed a crack in the brick (90 year old home), water in the basement, and moss on the roof. Her appraisal came in at $131,000 yes $131,000. That's $63,000 in instant equity. WOW!!! So we had the crack (setelling, again 90 year old house), water in basement (leaky drain pipe, which I fixed), and moss on roof (not under shingles, was able to take care of with some bleach and a pressure washer) checked by professional contractor. Who signed off on everything. So we moved on to fixing the other issues. We found extra storm windows in the garage so we replaced the broken one, we removed the broken storm door, and replaced the broken light fixture (on sale at Lowes for $29). The most expensive was the paint, we found an excellent painter who fixed the problems with the chipping paint for only $250.00, we will have him come back in a few weeks to completely redo the outside. We done our required pest inspection, and our home inspection on Tuesday of this week. Home inspection was good, and pest inspection found no termites. YAY!! Appraiser came back Thursday, and we passed with flying colors. Appraiser submitted her final report to mortgage company. Thursday was a busy day for them, because title search was completed, and my Loan cleared underwriting. So everything was sent to USDA for final approval. Within four hours of being sent to USDA it came back approved with 100% LTV. We close Monday 4/24/17. Yay Us!! We started this process on December 21, 2016 and it's finally ending April 24, 2017. A total of four months. I know they say mileage may vary on Short Sales, but in my opinion this was one of the successful ones. We're almost home :)

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  • Rebecca Roberts March 29, 2017 at 8:51am

    Hi Henry!

    It may sound strange and is very uncommon, but it does happen.  I have had at least 3 deals in the past decade where the short sale lender asked for a lower offer.  In a nutshell, it sounds like the short sale lender completed their bank appraisal which came in at $70K.  Because this is a VA loan they have to follow federal guidelines for the short sale which says they need to sell the property for the appraised value that they have on file.  More often than not this means they ask for more than what was offered but in this case they have to ask for less.  Even though they are required to ask for the appraised value they also would rather have you adjust your offer now instead of approving the deal at the price you offered only to find out during your appraisal that the property appraises for less and they have to go back through the whole value adjustment and approval process again.  It is better to adjust the price now and get the deal approved and closed in the next 30-45 days rather than drag it out for another 3+ months.

    The 3% in concessions is also standard for the short sale lender to agree to pay.  I have never seen a short sale lender pay more.

    If you are being told that your updated offer is just waiting for approval then you are in the home stretch.  Just sit tight and you should have your approval shortly.  Congratulations!  :)

  • Henry R Morton March 22, 2017 at 7:51am

    The home was listed in August of 2016 at $129,900 In November the price was dropped to $119,900. We put in an offer of $110,000 in Late December. We reviewed all the comps in the area with our Realtor so $110,000 seemed like a fair price taking into account the repairs that need to be made. I'm not sure how a VA loan actually works but the realtor was told by the federal guidelines they have to follow, our offer had to be $70,000 for it to be accepted. Not that I'm complaining this leaves more money in our budget to tackle other things. The home last sold in 2008, before the housing crash for $172,000. We have re-submitted our offer as asked, and were told we should have our final approval very soon. the only other change was in our original offer sellers bank was to bring 4% to closing. They only agreed to 3% but we can live with that. :) 

  • Jonathan Katz March 22, 2017 at 7:24am

    I've never seen a bank say this but maybe it's possible that the bank sees you are paying above FMV and that the property won't appraise at closing? What's the price point?

    Brett@ishortsalenow.com

    310-564-6389

    www.ishortsalenow.com

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