House appraised 100K over asking price (appraisal, agent, second mortgage, mortgage)
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We are in the process of buying a home and in the process of applying for a mortgage. We just found out today---the appraisal came in 100K OVER the sales price! We bid the house up slightly, because we didn't want to lose it, and the sellers accepted our terms, all in writing, etc. I don't know how this happened but good for us!
My concern is, could the sellers rescind the offer and ask for more? I do believe this is a bit of a "distress" sale. From what I can figure out, the owners are now in a nursing home, and the adult children are selling the home to spend down the parents assets to qualify for Medicaid---qv, subject of many other threads on here.
Lots of questions--
Can sellers pull offer and make another offer for a higher price?
How does appraisal value relate to market value?
Would we be able to waive PMI if there's 20% + equity in the home, even though that's not all from our down payment? In other words, is it necessary to have 20% of OUR money in equity, or just 20%+ equity in the home?
Would our taxes be based on the appraised value, or our purchase price?
Can the seller cancel? No, assuming of course that you don't ask for anything else during the process and you meet your obligations of the contract for your mortgage, inspections etc. IF they do try and cancel and you've fulfilled your end you can sue them for specific performance and force the sale of the home.
It is unlikely they'll find out about the appraisal unless your agent has loose lips. You paid for the appraisal, all the seller needs to know is that it met the requirements for the mortgage. Your realtor is an idiot if they share the amount and so are you if you do. Keep that close to your chest.
Appraised value and market value are not the same thing. So don't mix them up. Appraisals are an art form as much as they are a science. Two appraisals for different purposes will be very different. Say one for tax basis to the IRS and one for a second mortgage or to remove PMI.
PMI would be waived with 20% equity in the home, regardless of how much down payment you make. Mom and Dad can sell you a house for 30k that is worth 500k. You can finance 100% of the purchase price without PMI in the case becaues of all the equity in the actual value of the home.
Taxes are based on market value. It will depend on what the local property appraiser does but for the most part they don't care what the home sells for but use market value to determine tax. Depending on how good they are at their jobs and their own procedures it is possible they accept the sale price, it really depends on what other homes in the area are going for and the specifics of your property combined with how lazy the person that gets your file is. Unlikely they'll let 100k difference slide but it is possible.
Sellers don't have access to your appraisal. Only you and your lender get a copy of the appraisal. If one was sent to the sellers, shame on the person who sent it. It's none of their business as they didn't pay for it.
And no, you do not get credit for that equity as it's paper equity, not real equity. You will still have to pay PMI if you don't pay 20% of your contract price.
Thanks for the answers, folks! I doubt the seller has the appraisal price.
Is it typical for a house to appraise above the selling price? We're in Texas. To appraise that much above theselling price? Is this a new normal? I'm used to barely breaking even!
True. The lender might ask for a second opinion as they do get concerned when the value is considerably off. They sometimes start thinking it's very distressed, and what could be wrong with the house for the seller to sell so low.
Quote:
Originally Posted by MaryleeII
Is it typical for a house to appraise above the selling price? We're in Texas. To appraise that much above theselling price? Is this a new normal? I'm used to barely breaking even!
Nothing is typical or normal in any part of Texas right now. Each market is different and doing their own things. Houston started slowing down a few weeks ago. Austin started slowing down a couple of months ago. Dallas is still going strong... you can't summarize Texas into one generalization.
I assume it was the lender that ordered the appraisal and as such it is very doubtful they'll object to anything.
No it isn't typical for homes to appraise 100k over sale price in a normal transaction. It happens, transactions that don't meet "arms length" rules commonly will sell homes under market value for one reason or another. That isn't the case here so it would be rare.
People generally aren't in the habit of letting 100k go and if they priced it low to get more offers they wouldn't of taken the first one that came through. So the whole thing doesn't make a ton of sense unless the people selling and the realtor don't have a damn clue as to what market value was.
I assume it was the lender that ordered the appraisal and as such it is very doubtful they'll object to anything.
No it isn't typical for homes to appraise 100k over sale price in a normal transaction. It happens, transactions that don't meet "arms length" rules commonly will sell homes under market value for one reason or another. That isn't the case here so it would be rare.
People generally aren't in the habit of letting 100k go and if they priced it low to get more offers they wouldn't of taken the first one that came throughvalue w. So the whole thing doesn't make a ton of sense unless the people selling and the realtor don't have a damn clue as to what market as.
I don't think they "...have a damn clue"
Just looking at the comps for the area, included is a piece of undeveloped land. Its just one lot, but I think the sellers lumped that price/sq ft with the per sq ft of the houses in the area, which would bring the house about in line with the asking price. Remove that lot, and the price is more in line with the appraised price. I/ve been watching listings in that area, and when I saw this I jumped at it.
Also, I have the impression this belonged to an elderly couple who either died or went to a nursing home and the heirs are selling it.....
Thanks for the answers, folks! I doubt the seller has the appraisal price.
Is it typical for a house to appraise above the selling price? We're in Texas. To appraise that much above theselling price? Is this a new normal? I'm used to barely breaking even!
It happens. Rare but it happens. House I just bought appraised for 200k over list. The only impact for me was bank requesting a second appraisal to verify due to the enormous difference. Didn't even delay my closing. Seller never knew. In my case, I think she had a "friend" list her house who was not familiar with rural property and thus underpriced it badly. We lucked out because we were the first to see it, offered her everything she wanted and had it under contract by the end of the first day in the market.
It happens. Rare but it happens. House I just bought appraised for 200k over list. The only impact for me was bank requesting a second appraisal to verify due to the enormous difference. Didn't even delay my closing. Seller never knew. In my case, I think she had a "friend" list her house who was not familiar with rural property and thus underpriced it badly. We lucked out because we were the first to see it, offered her everything she wanted and had it under contract by the end of the first day in the market.
Did you have to pay the second appraisal?Do sellers ever order their own appraisal?
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but good for us!
