The townhome didn’t appraise

Bad news – The appraisal for the townhome came in significantly lower than the price we offered.

There’s three main reasons that could happen. I could have offered too much for the house. The appraisal could be wrong. Or, sometimes houses don’t appraise well in a rapidly rising market, where there aren’t historical prices to justify the current ones.

If I offered too much, there should be better homes for better prices available. Except there’s not. (Believe me, I’d know if there was.)

Is the appraisal wrong? I went back and spent a lot of time looking at the comps. I looked at the low comps on the appraisal, and the high comps that the seller’s agent “helpfully” provided (LOL). And I found even better comps on Zillow (which has a “recently sold” feature by the way, very useful).

I made a spreadsheet and sorted all the amenities, and looked at all the photos, and mapped them all. Based on my research, I think the appraisal is a little low, but not a lot. The appraisal did miss the most similar comp – a recently sold neighboring townhome a block away and right on the trail, same floorplan, similar amenities, etc. (Why was that missed? Come guys, you’re the professionals here.) Even though the appraisal was badly done, when I look at the comps, I can’t justify the price we offered for the townhome.

Except, it seems to me like there’s no better deal on the market right now in that price range. So has the market been going up? Is that why there’s no comps as high as my offer? The market in Santa Fe has not been going up recently. However inventory has been going down, and things are selling faster. Usually that happens right before prices start going up. So I may be caught in the cusp of a new rising market. Or there may just be a temporary shortage of houses on the market right now, and it will correct soon.

The bank uses the appraised amount to determine the amount of the loan. So to proceed, we would need to make up the difference ourselves by increasing our down payment. If the appraised value was only slightly lower than the agreed-upon purchase price, we wouldn’t worry about it and just increase our down payment. But in this case, it’s a huge gap.

We can try to negotiate the price down somewhat, but there’s no way the sellers are going to come down that far. Since it didn’t appraise, we are free to get out of the contract. But we would still actually like to buy that townhome. So it’s been discouraging. Now there’s a long holiday weekend. We won’t know anything more until next week sometime.