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The home is going for $55K and the appraisal is coming in at $43K.
The asking price is what the seller is hoping to get for it. Most are priced higher than market so that there is some room for negotiation. Is this a private seller or is it, perhaps, a bank owned property? The asking price may have little to do with market value of the property.
What is the true condition of this palatial estate you're hoping to buy? Built in the 50s and updated in 76? That was forty years ago. What is the remaining economic life of this property? If not updated, what is the impact on marketability of the property? What upgrades/updates have been made, what appliances/outbuildings, etc., are actually conveying with the property, and does the property meet the NEW FHA standards that went into effect this past September? These new FHA standards limit severely what an appraiser can do with FHA properties.
If you are working with a RE agent, have that agent pull a current CMA with REAL comparable properties so you'll have a better idea of what the local markets are doing. You've had a chance to see this property and have a home inspection so, using that knowledge, your RE agent should be able to really drill down and get some good comps for that CMA. Secondly, ensure your agent understands the new FHA standards. He/she may be a bit behind the times and not giving you good advice on what this property should sell for.
EDIT: One additional thought -- this is an older home, one built in the 50s. This property is nearing the end of the home's useful life unless it has made major structural updates or maintenance. You MAY bump into the lender's internal policies lending on homes that are almost 70 years old unless you can PROVE the structural and mechanical updates have occurred.
Last edited by TexasDillo; 12-01-2015 at 11:40 AM..
It's also been on the market for a year because no one else saw the potential in it.
You're not really buying potential here. You're buying what the house is right now. Reason it sat was because other buyer's in the market didn't agree with the asking price.
You can appeal, but your only option may be to come up with the difference on your own, but that means you walk into home ownership instantly with negative equity. Not a problem if you plan on staying there a long time.
If I could afford to pay some of the difference I would, I just need a place to live but I can't afford the difference. I already asked the re agent if he thinks that the appraisal report comes back at about $50K that we can remove the 5% seller concession and I can pay that for extra closing costs and we can make a deal. He's not sure. I even told him to remind the owner that it's an older home built in the 50s but updated in 76, he will need to pay $6k in a few years for a new roof, and his renters are going to continue to destroy the place because they had put 2 huge holes in the wall that he had to fix before appraisal. Renters will destroy his home to the point where it will be dilapidated. Also insurance is high, with high deductibles I can pay $1200 a year, but without them it's $2K a year which is more than the principle per year. It's also been on the market for a year because no one else saw the potential in it.
If it's an FHA appraisal it will stay with the property for several months before a new one can be ordered. Besides that buying a home from the 50's can be a real financial nightmare.
It's also been on the market for a year because no one else saw the potential in it.
The ONLY reason a house doesn't sell at the listed price for that long, is because it's over priced for that market, at that time. It doesn't matter if a house is an immaculate mansion OR a POS "handyman special", too high of a price is always the reason it doesn't sell fairly quickly. Think about it...
Anytime a seller, OR real estate agent uses the term "Lots of potential" in a listing, that means: "Lots of WORK and MONEY needs to be thrown into this POS, and MAYBE it'll then be worth what I want for it NOW!"
Also, the so-called "deal of a LIFETIME!" house comes around pretty regular, IF you are looking for it.
So, don't despair even if this particular house deal doesn't end up working out for you. Another one, maybe even a better one, is out there waiting.
Yeah, I guess it's not meant to be. Maybe it's a blessing in disguise.
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