waiving appraisal within 2% of contract? (PMI, property, lender, sales)

[Cpatrick89]

Hey guys and gals, we're putting our best and final bid of $250k on a property that was listed for $229k. We have $30k to put down, i know its not much put out mortgage guy said it would definitely work if our offer got accepted. Our agent has told us in-order to have our offer stand out we could "waive appraisal so long as home appraises within 2% of the contract price.". What does this mean? Any help would be great, this is our first home so we don't want to mess up!

Thanks Much

[SmartMoney]

If I am reading it right, you are agreeing to pay 250K as long as the appraisal comes in at 245K. ie, you are paying the first $5,000 out of pocket. Your lender will use 445K as the "sales price or appraised value, whichever is less" to calculate your down payment and PMI.

[jackmichigan]

I think that's a good way to phrase it because it makes it sound like you're waiving the appraisal, but you're not--you're just putting a limit on it. You're saying that your offer is good provided the appraisal comes in at $245K or higher. If it comes in lower, you could use the appraisal to try to re-negotiate the price lower...or you could agree to still accept the $250K price knowing that you'd need to contribute more for the down payment. You could also walk away from the contract. The choice would be yours.

Has your mortgage guy outlined the full costs for your mortgage--including mortgage insurance? You should be aware of the full costs (going into it and the amount of payments) before making your offer.