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.
OK, we have one contract on the house and another being presented today. The first was at full value with a minimal FHA down payment and no seller contributions to the buyers closing costs. The other will likely be a similar bid, a conventional loan, and they have a lot of cash for about a 20% down payment. My concern though is over the appraisal. We priced at the high end for what houses have recently sold for in our area. I figured we might have to drop the price some to meet an appraisal if it comes in low. However with the backup bid having the cash what are the options for a low appraisal?
1. Is the appraisal required to meet the full agreed to asking price?
2. Can the buyer literally pay down the difference between the agreed to price and the appraised price in their down payment?
3. Can the buyer give me the difference directly and I then lower my asking price accordingly?
4. Can I take back a second mortgage for the difference?
Loan amounts are based on appraisal if it's lower than the contract price. For example, you're under contract for $225k, but the house appraises for $200k. If the buyer wants to put down 20%, the 20% is based off the $200k price and he would have to bring cash for the difference. It's NOT going to happen in this market! A buyer isn't going to buy a house that doesn't appraise. If he doesn't put down the 20% PLUS the remaining money, he will then need mortgage insurance which is what he's trying to avoid, or a second lien, again, which he's trying to avoid.
Loan amounts are based on appraisal if it's lower than the contract price. For example, you're under contract for $225k, but the house appraises for $200k. If the buyer wants to put down 20%, the 20% is based off the $200k price and he would have to bring cash for the difference. It's NOT going to happen in this market! A buyer isn't going to buy a house that doesn't appraise. If he doesn't put down the 20% PLUS the remaining money, he will then need mortgage insurance which is what he's trying to avoid, or a second lien, again, which he's trying to avoid.
I know two people that brought extra money to the table to buy houses recently. In one, original contract was at $525, appraisal came back at $480, and the final purchase price was $500. I don't know the exact numbers of the other.
I personally wouldn't do it, but these people felt they were getting a fair price and that the appraisers were bringing foreclosures in that affected the appraisal value unfairly.
It's NOT going to happen in this market! A buyer isn't going to buy a house that doesn't appraise. If he doesn't put down the 20% PLUS the remaining money, he will then need mortgage insurance which is what he's trying to avoid, or a second lien, again, which he's trying to avoid.[/quote]
I would never overpay for a house....the market speaks for itself...why should I overpay for a house before I even own it while most of the time the sellers are making a profit anyway....Dumb! Most of the time if there are alot of foreclosures in the area that means the this is the market there and this is where prices should be at...they obviously bubbled more than the should have.
Loan amounts are based on appraisal if it's lower than the contract price. For example, you're under contract for $225k, but the house appraises for $200k. If the buyer wants to put down 20%, the 20% is based off the $200k price and he would have to bring cash for the difference. It's NOT going to happen in this market! A buyer isn't going to buy a house that doesn't appraise. If he doesn't put down the 20% PLUS the remaining money, he will then need mortgage insurance which is what he's trying to avoid, or a second lien, again, which he's trying to avoid.
OK, let me see if I interpret what you said correctly. The buyer would put down the 20% on the $200K appraised value with $180K as the final loan amount. Then he would have to pay in cash any agreed to difference between the original contract price and the appraised price (in this hypothetical case then that would be $25K) or I would have to drop my price that much or some combination of the two.
As for whether buyers are buying down the loans, it is happening in my neighborhood. We just had one up the street that sold for $285K and the buyer paid down the difference in cash. Right now we are in a temporary sellers market out here because folks are desperate to get houses that will close by the end of November so they can lock in a low interest rate and also qualify for the $8K credit. Also, most homes for sale are foreclosures and short sales which risk not meeting the closing deadline so there is a premium being paid for conventional sales. We have had 2 showings in 2 days and both are hot to trot! Conventionals here are now hitting the market and are under multiple contracts in a couple days. Of course this is likely to all dry up in early November as we approach the DEADLINE!
I personally wouldn't do it, but these people felt they were getting a fair price and that the appraisers were bringing foreclosures in that affected the appraisal value unfairly.
OK, let me see if I interpret what you said correctly. The buyer would put down the 20% on the $200K appraised value with $180K as the final loan amount. Then he would have to pay in cash any agreed to difference between the original contract price and the appraised price (in this hypothetical case then that would be $25K) or I would have to drop my price that much or some combination of the two.
Yes, you understand correctly, except your math is a little off. The final loan amount would be $160k with 20% from $200k being $40k.
I think the difference between a foreclosure value and a conventional is that it might cost you $50-75K or more to bring the dwelling back to liveable condition. We had one around the block from us last year that sold for about $110K to a contractor who rebuilt it and was able to sell it for $244K, however I don't think he made much if anything off the deal other than covering his expenses, his salary and that of his employees. In many cases these foreclosed houses are stripped of anything of value and are nowhere near as valuable as a well maintained conventional home in the same neighborhood. So the real problem these days is "are these foreclosed homes to be considered true comparables"?
OK, let me see if I interpret what you said correctly. The buyer would put down the 20% on the $200K appraised value with $180K as the final loan amount. Then he would have to pay in cash any agreed to difference between the original contract price and the appraised price (in this hypothetical case then that would be $25K) or I would have to drop my price that much or some combination of the two.
As for whether buyers are buying down the loans, it is happening in my neighborhood. We just had one up the street that sold for $285K and the buyer paid down the difference in cash. Right now we are in a temporary sellers market out here because folks are desperate to get houses that will close by the end of November so they can lock in a low interest rate and also qualify for the $8K credit. Also, most homes for sale are foreclosures and short sales which risk not meeting the closing deadline so there is a premium being paid for conventional sales. We have had 2 showings in 2 days and both are hot to trot! Conventionals here are now hitting the market and are under multiple contracts in a couple days. Of course this is likely to all dry up in early November as we approach the DEADLINE!
Folks are paying over the appraised values to get 8k in return? Huh?
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 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.
I would never overpay for a house....the market speaks for itself...why should I overpay for a house before I even own it while most of the time the sellers are making a profit anyway....Dumb! Most of the time if there are alot of foreclosures in the area that means the this is the market there and this is where prices should be at...they obviously bubbled more than the should have.
