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Are there any risk or issues or concerns with a house over appraising? This is the lender's appraisal, for a new construction build. It's coming in close to 10% above purchase price, which was the standard pricing, not a discounted spec home or anything like that.
Maybe a risk for the loan going through? I don't know how carefully underwriting reviews appraisals and if they would have any questions about a house selling for that much less than it's supposedly worth.
I don't think it's worth that higher amount, btw, but it's a little hard to tell because the selling price of most of the houses in the subdivision isn't public yet. I suppose the value of all the homes could have gone up since the builder broke ground.
If the lender is loaning you money, the house is the collateral. If it is worth more than what they are loaning to you ( higher appraised) then it is a win win situation for you and the bank.
It is not out of the realm of possibility to have a proposed new construction (construction to permanent) appraisal come in over the contract price, particularly if you negotiated well or have a motivated builder/seller. The builder costs plus profit comes in less than the mortgage value.
I've seen where the home builder discounted a proposed new construction just to move the property so that he could obtain more funds to build another home. The buyer bought the home about $20K below market value. Yep, motivated builder/seller.
It is not out of the realm of possibility to have a proposed new construction (construction to permanent) appraisal come in over the contract price, particularly if you negotiated well or have a motivated builder/seller. The builder costs plus profit comes in less than the mortgage value.
I've seen where the home builder discounted a proposed new construction just to move the property so that he could obtain more funds to build another home. The buyer bought the home about $20K below market value. Yep, motivated builder/seller.
This is not a case where I paid less than the going rate though. It's in a very, very popular area of Denver, and in our hot real estate market, they don't need to discount to get things sold. And it's a large tract builder, one of the largest in the US, not a small builder who needs cash flow. So I paid standard pricing, no bargains here! I think it's worth what I paid, once you factor in location, as the same models sell for significantly less in other locations in the metro area. But maybe values have continued to increase over the months since I bought?
In any case, as long as it's not a red flag for the underwriter, that makes me happy. Just don't want anything messing up my loan and closing!!
This is not a case where I paid less than the going rate though. It's in a very, very popular area of Denver, and in our hot real estate market, they don't need to discount to get things sold. And it's a large tract builder, one of the largest in the US, not a small builder who needs cash flow. So I paid standard pricing, no bargains here! I think it's worth what I paid, once you factor in location, as the same models sell for significantly less in other locations in the metro area. But maybe values have continued to increase over the months since I bought?
In any case, as long as it's not a red flag for the underwriter, that makes me happy. Just don't want anything messing up my loan and closing!!
I think what you are experiencing is an increasing market, as indicated by a balanced or shortage of supply (available homes) and/or by increasing market prices.
For a mortgage-backed construction-to-permanent loan, the initial appraisal is for the market value on the date of appraisal. Fast forward a few months, when the home is now completed, the appraiser confirms that the home has been completed to plans & specs and that the home has not decreased in value (both of which are concerns for the lender).
Thanks TexasDillo! I am less concerned about the value, because I'm not selling any time soon, and the market and values are likely to be totally different by whenever. So it's just about the mortgage going through and the closing taking place. At this point, it looks like I've done everything I need to do and now it's on the builder to finish!
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