The appraisal came back -- waaaaay under the agreed upon selling price. Holy crap. Our choices are:
1) walk away from the property
2) pay the entire difference ($50K that we don't have)
3) split the difference with the seller
4) offer to pay the appraised price
On the face of it, number 4 seems like the most logical choice but it isn't. The property is worth the agreed upon price. We have asked the seller to split the difference with us. If all else fails, we will modify our loan. We want the property and if we walk the chances are good the same thing will happen again on the next property we find.
65% of escrows in California fail for this very reason.
In 2008 after the housing collapse, the rules were changed. Instead of lenders being able to use local appraisers with proven track records, the government mandated an arms length relationship (which makes sense). Implementation created a third party appraisal company. 25,000 qualified and experienced California appraisers were put out of work. The third party company staffed up with inexperienced (and cheap) appraisers.
Now, a lender sends a request for an appraisal to the company. They have a rotating list of appraisals and offer the job to the next name on the list, regardless of geography. This explains why the first appraisal was done by someone 50 miles away. The price of appraisals also went up (someone has to pay for that middleman). In rural areas, the price went up by more than 25%.
So, here we sit with lots of other folks at the mercy of inexperienced appraisers who don't understand rural properties. We are frustrated beyond belief; living in a hotel, the dogs in a kennel (yes, TexWisGirl, it is killing us), not able to ride, and not able to move forward with our lives.
And, not alone.
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