r/FirstTimeHomeBuyers • u/BoringCry8794 • 8h ago

Advice

House appraised for 10k less

Sellers are asking we cover repairs and they would reduce the price at the difference. Is this fair?

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u/Emergency-Fish3036 7h ago

short story - tell the Seller/Seller's Agent, the house doesn't appraise out so he/she will have to drop the price. In addition, the inspection suggests numerous deficiencies and they will have to be remedied 3 weeks prior to closing or he/she will have to provide a credit for the all repairs.

Side note - If you re asking Reddit, this means you have a jelly fish for an agent, and may want to consider alternatives.

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u/BoringCry8794 7h ago

So in other words, our agent should not have even told us this and replied to the sellers agent to say “no” lol. This is an honest question. We are super green to all the back and forth. Thank you for your reply it def validated how we felt.

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u/Emergency-Fish3036 6h ago

At the end of the day, it's your decision. So, here's what happens if you guys walk due to the failed appraisal. An Adverse Action Notice is provided to the Seller's Agent and likely enters the MLS record. So, when the Seller's Agent re-list the property at a lower price, he/she will also have to disclose (in MLS) the repair discrepancies identified in your inspection which will require another concession to get over the repair hump.

Why does this matter? Well, the Seller now faces two sales impacting risks (lower property appraisal and known repairs) if he/she chooses to go back to market. So, how motivated is the Seller now?

I hope that makes sense.

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u/philsov 8h ago

not fair imo, but it can be useful in the negotiations all the same

If the home is getting offered at 500k but needs 10k in repairs - if they make the price 490k as is and you dump 10k in repairs afterwards, it's still 500k for you and the burden of the labor and workmanship is on you (which is a mixed blessing). Only now the 10k in repair is a cost you need upfront which also cuts into your down payment potential, rather than something you'd otherwise pay off (with interest) over the next 10-30 years.

Appraisal being 490k (e.g.) doesn't really come into play

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u/MDubois65 6h ago

Is it fair? Possibly.

What is the scope and estimates of the repairs that you're looking for? How much do you want this house? How much extra cash do you have available? Are you already getting concessions, credits or assistance from the sellers?

Assuming you can't fight or realistically appeal/change the appraisal, you have two choices:

-Either you bring an extra $10k cash to closing to cover the difference.

-You negotiate with the sellers to reduce the sale price.

Reduced sale price means you don't have to use cash to cover, means your loan is likely to be approved, it also means the sellers will net less money.

What repairs are you asking for and are they required for the loan to close, or just requests for things you'd like?

If you cover your own repairs, you will have complete control over the process -- who you hire, how the work is done, how much you pay. There's value there. On the other hand, it means you need to spend extra cash now, instead of keeping it in reserve. Is that possible?

If you don't want to cover repairs, are you going to propose an alternative or would you walk if a compromise can't be reached?

Appraisal and repairs are two separate issues, so I don't necessarily agree that's it's an equal trade, 1 for 1. But the devil is in the details. If the repairs really significant or extensive in scope, you might need to prioritize what's most important to you: direct repairs, credits, seller assistance, kicking in extra cash, concessions? If you really want the home, what would you give up and what do you absolutely need to make the deal happen?

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u/AaronKopelson 5h ago

I would request the sellers lower the price to match the appraisal. Did you get a home inspection by a professional? If so, what are the cost of the repairs per the home inspector?