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My wife and I just purchased a home. The asking price was $255,000. Since the seller just finished a large renovation on the home and the traffic was huge we offered the seller full asking price and asked them to cover all closing costs. They countered by offering to pay half the closing costs and we pay half. Because all the cash we have is going towards the down payment (3.5% on an FHA loan) we don't have the $4000 for our half of the closing costs. We decided to wrap those costs into the loan by paying $259,000 for the house and the seller will pay the $8000 closing costs and get our half in the loan. However after researching a little I am finding that if the appraisal comes in under the purchase price ($259,000) we either have to renegotiate the contract or pay the difference in cash. The house is 2064 square feet and Just underwent a ton of renovations to improve almost every aspect of the house. We really love this house and don't want to lose it. Price per square foot comes out to $125. My questions are:
1) How close are appraisals and asking prices generally?
2) Is $125 per square foot a good value? We live in Boise, ID and the market is quite strong.
Any help or advice would be great. Thank you!
1. usually pretty close or sometimes above, ( when doing a lease option purchase)
2. The appraiser will look more at comparable properties than price per sq.ft. They may find properties pending you or the seller did not. Does your realtor or lender have solid comps available to make you feel more at ease?
closing costs: Well, your mortgage broker, (unless you used a bank ) typically can offer closing cost credit based on the rate. Example at 3.75 no credit, at 4.00% you will get a credit. Many times mtg brokers can match the bank's rate and give credit to borrower for closing costs. Happens a lot. Last FHA loan we did, buyer got $5,000 in closing costs. Disclosure: each loan is different so not every borrower will have same credits.
closing costs: Well, your mortgage broker, (unless you used a bank ) typically can offer closing cost credit based on the rate. Example at 3.75 no credit, at 4.00% you will get a credit. Many times mtg brokers can match the bank's rate and give credit to borrower for closing costs. Happens a lot. Last FHA loan we did, buyer got $5,000 in closing costs. Disclosure: each loan is different so not every borrower will have same credits.
I agree and as long as your debt to income ratio allows for the higher ratio the difference is not staggering. On 100K loan based on 3.92% + 0.25% higher only about $14 more a month, that's like $3.50 a week more which is like nothing in order to get some additional closing costs credits.
When I was looking for a home I saw some that offered closing cost and the monthly payment was not so much higher to kill the deal.
Last edited by LifeIsGood01; 02-20-2017 at 01:17 PM..
The appraisers will most often meet the price the buyer is offering unless it is way, way off. They are all part of the same food chain and want repeat business through the sales people or lenders.
^^^^^ this
I've seen only once in recent times that the appraised price was exactly the contract price. The one exception was about $500 off in my (buyer) favor.
Everybody loses if the deal falls through. If the lender is willing to play ball it will go through. Don't they get to pick the appraiser?
I've seen only once in recent times that the appraised price was exactly the contract price. The one exception was about $500 off in my (buyer) favor.
Everybody loses if the deal falls through. If the lender is willing to play ball it will go through. Don't they get to pick the appraiser?
The appraiser has to be impartial. I think the bank does not pick the appraiser per se. The appraiser will be in serious trouble if he is in cahoots with the bank to inflate prices to let a sale go thru. They also have to carry a very expensive insurance policy, I'm guessing in case they are sued for fraud.
I think it's like a pool the bank submits a request and an appraiser answers it according to their availability.
The bank orders the appraisal and the buyer pays for it.
Sorry LifeIsGood but in multiple purchases over the last few years it is my experience that the appraisal comes in EXACTLY the same price as the purchase contract price, right down to the penny with that one exception I noted (a short sale where it appraised $500 over my purchase contract price).
The appraised value couldn't possibly agree with the purchase contract price that often unless the appraiser knows the contract price in advance. Of course the appraiser would not appraise for a given price unless he could support it with his professional opinion.
Furthermore unless contradicted by a Realtor or mortgage professional, I am pretty damned sure it is the lender who picks the appraisal company. Appraisers are certified and insured. I expect the lender has a relationship with an appraisal company, and the appraisal company assigns the next available appraiser.
1. usually pretty close or sometimes above, ( when doing a lease option purchase)
2. The appraiser will look more at comparable properties than price per sq.ft. They may find properties pending you or the seller did not. Does your realtor or lender have solid comps available to make you feel more at ease?
closing costs: Well, your mortgage broker, (unless you used a bank ) typically can offer closing cost credit based on the rate. Example at 3.75 no credit, at 4.00% you will get a credit. Many times mtg brokers can match the bank's rate and give credit to borrower for closing costs. Happens a lot. Last FHA loan we did, buyer got $5,000 in closing costs. Disclosure: each loan is different so not every borrower will have same credits.
Furthermore unless contradicted by a Realtor or mortgage professional, I am pretty damned sure it is the lender who picks the appraisal company. Appraisers are certified and insured. I expect the lender has a relationship with an appraisal company, and the appraisal company assigns the next available appraiser.
I agree with you regarding as a general rule, there is an effort to make a transaction work. The universal exception: when the sales price is packed with seller concessions above what the comparables can support (as in any appraisal).
However, on the bank choosing the appraiser - we had HVCC, which was replaced by AI (Appraiser Independence). Almost all banks and mortgage companies no longer select the individual appraiser, but leave the selection to a third party service, that selects an Appraisal Management Company (AMC) or an appraiser. But the regulations are clear and require no one on the production side of originating loans is to be involved with appraiser selection. Most banks don't want the burden of providing someone outside of the mortgage department ordering appraisal. (Almost all operations staff are now compensated for volume, so processors can't place the order).
I get that, but the rule has gone stupid. Last week, I heard from a friend at a major bank. Last month she had a report with a plethora of mistakes, she wondered if the subject property was appraised. The report was performed by someone who had earlier included photos of the wrong property in another report. Of course, she had thought the appraiser was cut after the first fiasco, only to be told, cutting the appraiser was not easy. (She made it sound like her bank was afraid to drop a bad appraiser). My soapbox has always been in any other industry, the appraiser would be fired from further work.......But not when it comes to appraisal reports. How short-sighted is that?
I work in a real estate office in Boise, so I can offer some insight on this. (Note, not an agent)
It is very difficult to set prices right now in the area. What people are willing to pay is about $10k over what the appraisals and comps are coming in at. The last few I've heard agents in the office trying to set prices on have been like this: "It is worth $250k in today's market and I think you will get offers for that the first day, but the comps only show a value of around $240k. Do you want to price it high and try for a cash buyer and/or potentially negotiate down if the appraisal comes in low, or take the sure thing and price it where the appraisal is going to come in and avoid the complications?"
Appraisers do take the market trend into consideration, and give value for an uptrending hot market, which Boise is right now.
But if you are $125/square foot, I don't think you will have an issue on a remodeled house (ie not a fixer upper). I just looked at all Pendings in Boise from $200k to $300k. There are about 225 of them. The median $/sq ft was about $135/ft. But that is a little misleading, because bigger houses have lower $/sqft and vice versa, so a lot of big or small houses on the market can throw the numbers off. So I looked at just houses within 200+/- square feet of yours and yours is right smack in the middle. That is basically the median price/square foot for that size house in Boise right now. My guess is you are going to be ok.
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) typically can offer closing cost credit based on the rate. Example at 3.75 no credit, at 4.00% you will get a credit. Many times mtg brokers can match the bank's rate and give credit to borrower for closing costs. Happens a lot. Last FHA loan we did, buyer got $5,000 in closing costs. Disclosure: each loan is different so not every borrower will have same credits.
