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I'm of the belief that as long as their is enough of a cushion between the mortgage value and appraised value, to absorb any price declines, the bank will approve a mortgage. What this cushion may be though, I do not know.
Just as an example though, if a house was appraised for 500K but asking 600K and you put 400K down and take a loan for 200K and your family makes 200K, why would the bank not do this?
The house would need to lose over 50% value to even become a worry for the bank (note: not a problem but just something to watch). The borrower is still not underwater and can still sell to get the money for the mortgage back. The only loss here is the downpayment for the buyer.
Why buy a house above the appraised value? There ate too many fish in the pond. Many houses are sitting on the market. Don't hesitate to make offers way less than the asking price. And don't lose sleep over if you are rejected.
Why buy a house above the appraised value? There ate too many fish in the pond. Many houses are sitting on the market. Don't hesitate to make offers way less than the asking price. And don't lose sleep over if you are rejected.
Because bank appraisals don't reflect the actual market value of a house. They are based on a system that assigns a certain pre-set value to some features and ignores others. A friend of ours refinanced recently and the appraisal came in much lower than expected. She went over it with the appraiser and was told that her wood burning stove got no points (whereas her fireplace got lots of points), her original floorboards got no points, her exposed beams got no points, etc. She had a local realtor come in and appraise the house and the appraisal was 40% higher. Why? Because lots of buyers like and are willing to pay for wood burning fireplaces, original floorboards, and exposed beams.
Because bank appraisals don't reflect the actual market value of a house. They are based on a system that assigns a certain pre-set value to some features and ignores others. A friend of ours refinanced recently and the appraisal came in much lower than expected. She went over it with the appraiser and was told that her wood burning stove got no points (whereas her fireplace got lots of points), her original floorboards got no points, her exposed beams got no points, etc. She had a local realtor come in and appraise the house and the appraisal was 40% higher. Why? Because lots of buyers like and are willing to pay for wood burning fireplaces, original floorboards, and exposed beams.
I don't understand. The local realtor can get you a loan? How can anyone go with what a local realtor says something is worth? Isn't there a conflict of interest in a situation like that?
Times are bad. This is not a great time to take too many risks. It is better to be risk averse. If somebody has the ability and wants to burn money, that is obviously their choice.
My suggestion to OP: It is a good time to buy if you do not get obsessed with a specific house and find yourself overpaying. See as many houses as possible. Make low-ball offers. And don't get frustrated if a seller rejects you. Just move on.
The local realtor is not bound by the rules of a piece of paper.
The local realtor is hopefully adaptive in their assesments, meaning they are able to accurately judge what people will or will not like as a whole and put a superficial price on it.
Like DMA said, exposed beams are generally a +, but not according to the paper. If somoene goes and paints their kitchen green and has orange granite in the kitchen, the paper will just see granite and say +! Meanwhile anyone who walks into that kitchen will be wondering how much money they are going to have to spend to fix the ugliness.
EDIT: Apologies to anyone with orange granite and a green kitchen
I don't understand. The local realtor can get you a loan? How can anyone go with what a local realtor says something is worth? Isn't there a conflict of interest in a situation like that?
Times are bad. This is not a great time to take too many risks. It is better to be risk averse. If somebody has the ability and wants to burn money, that is obviously their choice.
My suggestion to OP: It is a good time to buy if you do not get obsessed with a specific house and find yourself overpaying. See as many houses as possible. Make low-ball offers. And don't get frustrated if a seller rejects you. Just move on.
My friend submitted the realtor's appraisal to her bank and the bank increased their official valuation of the house--and approved her refinancing. The bank understands that a local realtor knows what a house would currently sell for far more than a bank appraiser does. The realtor is taking into account what local buyers want and what will appeal to buyers. As FSXv13 says, the bank appraiser is simply checking off boxes and adding up points.
....My question is: based on your community knowledge, do you see housing prices declining in the coming months or staying pretty much steady? It seems to me that the higher priced homes (850K and over) are still at 2006 prices. Do you anticipate a drop in these houses? Or am I just dreaming! Thanks!
According to an article in the Sunday NY Times, the Westchester RE market is "no longer in free fall" and more people are buying since prices have stopped "plummeting." It goes on to say that the market is still "precarious." In another article, it says that the number of sales in January 2010 was 108% higher than the number of sales in January 2009.
I have to say I think the Times real estate coverage is mostly realtor-sponsored nonsense, but on the other hand what the Times says has a big effect on perception--and perception drives the market...
According to an article in the Sunday NY Times, the Westchester RE market is "no longer in free fall" and more people are buying since prices have stopped "plummeting." It goes on to say that the market is still "precarious." In another article, it says that the number of sales in January 2010 was 108% higher than the number of sales in January 2009.
I have to say I think the Times real estate coverage is mostly realtor-sponsored nonsense, but on the other hand what the Times says has a big effect on perception--and perception drives the market...
Thanks for the links! I guess I haven't seen the "free fall" that everyone is talking about. Perhaps I started looking too late. I'm going to keep my fingers crossed and hope that things start coming on the market. All that I see now are old homes that need alot of work and no AC for 800K and that have been sitting there for a while with no or little price reductions. It seems we will start looking in person next month for a July move in date. I'm hoping we can pull it off!
My friend submitted the realtor's appraisal to her bank and the bank increased their official valuation of the house--and approved her refinancing. The bank understands that a local realtor knows what a house would currently sell for far more than a bank appraiser does. The realtor is taking into account what local buyers want and what will appeal to buyers. As FSXv13 says, the bank appraiser is simply checking off boxes and adding up points.
I find this very hard to believe. A bank does not make a loan based on what a realtor says. And based on my experiences, realtors tend to greatly overstate the values of properties (wishful thinking, perhaps?).
I find this very hard to believe. A bank does not make a loan based on what a realtor says. And based on my experiences, realtors tend to greatly overstate the values of properties (wishful thinking, perhaps?).
Just as you can grieve your taxes, you can submit a realtor's appraisal and comps to challenge the bank's appraisal. It is common practice. I personally know of three people who have done so and in two cases the banks revised the valuation based on the realtor appraisal and the comps. While realtors routinely try to sell houses for as much as they possibly can--that is their job if they're the seller's agent--this is a matter of submitting an appraisal based on recent comps. I imagine that it is the comps that sway the bank, not the realtor's opinion.
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