U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
 
Old 10-22-2013, 08:56 AM
 
202 posts, read 469,903 times
Reputation: 82

Advertisements

n NJ standard real estate contract form, does a mortgage contingency IMPLY the house must be appraised for at least the sale price?

Here is the clause in the standard contract: "IF THE MORTGAE LOAN HAS NOT BEEN ARRANED, OR IF HTE BUYRER HAS NOT NOTIFIED SELLER OF BUYER'S DECISION TO COMPLETE THE TRANSACTION WITHOUT OBTAINING A MORTGAGE COMMITMENT, ON OR BEFORE JAN. 01, 2014, THEN EITHER BUYER OR SELLER MAY VOID THIS AGREEMENT BY WIRTTEN NOTICE TO THE OTHER PARTY."

If the house is appraised at lower value than the sale price, does this mean the bank will not loan me the money, thus the mortgage contingency will be triggered? If that is the case, what is my option?
Quick reply to this message

 
Old 10-22-2013, 09:31 AM
 
3,317 posts, read 7,253,255 times
Reputation: 4095
That seems to have nothing to do with appraisal. It seems to reference a cash purchase.

It means: get lending in place or notify that you are a cash buyer. Other line items will reference a Loan Commitment date, or Mortgage Contingency date.

Nothing is implied, it's all explicit. There should also be an Appraisal contingency which discusses the fact that the home must appraise at or above the price.
Quick reply to this message
 
Old 10-22-2013, 09:35 AM
 
202 posts, read 469,903 times
Reputation: 82
Quote:
Originally Posted by Pfhtex View Post
That seems to have nothing to do with appraisal. It seems to reference a cash purchase.

It means: get lending in place or notify that you are a cash buyer. Other line items will reference a Loan Commitment date, or Mortgage Contingency date.

Nothing is implied, it's all explicit. There should also be an Appraisal contingency which discusses the fact that the home must appraise at or above the price.
Sorry, I missed some info. Right before this clause, the contract states that I will put 20% down, and get $400k loan. So if the appraisal value is lower than the sale price, $500k, then will the bank still loan me 400k?
Quick reply to this message
 
Old 10-22-2013, 09:41 AM
 
3,317 posts, read 7,253,255 times
Reputation: 4095
If the appraisal is lower than the price, and no negotiation results in a reset of the price to match the appraisal, the loan is then based upon the lower number shown on the appraisal.

For example, if you are putting 20% down, and the appraisal comes in at $450,000 instead of $500,000, you would have to pay $50,000 at closing, and then on top of that put 20% down on the $450,000 in order to maintain the terms of the loan.

It is about the percentage of down payment on the lower of the two numbers, appraisal or price.
Quick reply to this message
 
Old 10-22-2013, 09:56 AM
 
202 posts, read 469,903 times
Reputation: 82
Thanks, Pfhtex.

Using your example, if the appraisal comes in at $450k, instead of selling price $500k, then the bank is only willing to lend me $360k instead of 400k. That means I can not get the $400k explicited stated mortgage committment in the contract from the bank, thus it does trigger the mortgage contingency clause? Am I right on this?
Quick reply to this message
 
Old 10-22-2013, 10:34 AM
 
3,317 posts, read 7,253,255 times
Reputation: 4095
The appraisal coming in below the price, in most situations, triggers it. But some markets are very hot, and the Cash-Buyer market has triggered removal or absence of an appraisal contingency. You have to read it on your specific contract.
Quick reply to this message
 
Old 10-22-2013, 10:42 AM
 
Location: Southern California
4,350 posts, read 4,931,746 times
Reputation: 2129
Quote:
Originally Posted by artking09 View Post
Thanks, Pfhtex.

Using your example, if the appraisal comes in at $450k, instead of selling price $500k, then the bank is only willing to lend me $360k instead of 400k. That means I can not get the $400k explicited stated mortgage committment in the contract from the bank, thus it does trigger the mortgage contingency clause? Am I right on this?
Are you trying to get out of the contract if the appraisal comes in lower?

If you are trying to buy the house and work out 'what if' scenarios, you need to talk to your lender/bank. You might have the option to obtaining a different type of loan at less than 20% down with different interest rate and cost if the seller agrees. Instead of a 80% loan you might only be able to get a 90% loan to value.
Quick reply to this message
 
Old 10-22-2013, 12:05 PM
 
16,490 posts, read 17,513,441 times
Reputation: 23546
Quote:
Originally Posted by artking09 View Post
Sorry, I missed some info. Right before this clause, the contract states that I will put 20% down, and get $400k loan. So if the appraisal value is lower than the sale price, $500k, then will the bank still loan me 400k?
No you would have to come up with the difference between the appraised value and actual purchase amount you agreed to buy. That's part of the reason houses fall out of escrow because of the difference in appraised value vs agreed sale price and the buyer having to come up with that extra money in order for the purchase to happen. And some buyers are stretched and can't raise the extra.
Either you would have to come up with the extra difference or seller will have to lower price to appraised value or somewhere are one there to make the sale happen
Quick reply to this message
 
Old 10-22-2013, 12:47 PM
 
202 posts, read 469,903 times
Reputation: 82
Quote:
Originally Posted by thelopez2 View Post
Are you trying to get out of the contract if the appraisal comes in lower?

If you are trying to buy the house and work out 'what if' scenarios, you need to talk to your lender/bank. You might have the option to obtaining a different type of loan at less than 20% down with different interest rate and cost if the seller agrees. Instead of a 80% loan you might only be able to get a 90% loan to value.
I just want to have the option to walk away without losing my deposit money if the appraisal is much lower than the sale price, and I don't want to bring extra money to fill the gap myself.
Quick reply to this message
 
Old 10-22-2013, 04:08 PM
 
1,263 posts, read 2,644,348 times
Reputation: 1872
Quote:
Originally Posted by artking09 View Post
I just want to have the option to walk away without losing my deposit money if the appraisal is much lower than the sale price, and I don't want to bring extra money to fill the gap myself.
It seems like you're trying to avoid an appraisal contingency in the contract. Why? You clearly want the advantages of an appraisal contingency, so write one in.
Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


 
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:
Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top