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First time seller/poster. We received an offer of $640k for our home in Colorado and the buyer presented a letter from their lender that they were approved for $575k. By my math that means they only need to come up with $65k in cash. My real estate agent has concerns about this offer regarding the home appraisal. As long as the appraisal comes in above $575 I should be fine, correct? Or are there other factors I'm missing.
First time seller/poster. We received an offer of $640k for our home in Colorado and the buyer presented a letter from their lender that they were approved for $575k. By my math that means they only need to come up with $65k in cash. My real estate agent has concerns about this offer regarding the home appraisal. As long as the appraisal comes in above $575 I should be fine, correct? Or are there other factors I'm missing.
Thanks.
As a tactic, buyers will often show you a pre-approval that's short of where their offer is. This is to show you that they're strecthing and can't afford your property hoping you'll reduce you're price. If they offer, and you accept, it's on them to make good on the loan. I'd probably negotiate a solid earnest and try to secure your side to the best that I could as your agent, but don't get caught up in the math of it all. They wouldn't offer if they couldn't afford it. If you're worried about the appraisal, order (and pay) for a private appraisal as a backup. I'm sure you could get a private appraisal done within a week or so.
Is this offer price at, above, or below what the home was listed at? Not sure why your agent would have appraisal concerns. One of their jobs is to look at comps and advise you on a list price that will get you as much as possible, but still get offers and make appraisal. Are there a lack of recent comps, or is this a unique property?
The appraisal affects how much the lender will lend, but could also affect what the buyer is willing to pay. Say the appraisal comes in at $650k. The lender should be willing to lend the $575k (around 88% LTV). But the buyer could say I'm only willing to pay $650k now. Does the offer have an appraisal contingency? Does it have any language guaranteeing to cover an appraisal shortage?
First time seller/poster. We received an offer of $640k for our home in Colorado and the buyer presented a letter from their lender that they were approved for $575k. By my math that means they only need to come up with $65k in cash. My real estate agent has concerns about this offer regarding the home appraisal. As long as the appraisal comes in above $575 I should be fine, correct? Or are there other factors I'm missing.
Thanks.
I believe that is correct, as long as the appraisal covers the loan amount, you're good.
The bank doesn't care if the buyers lose $5 or $5,000,000 of their own money in case of default.
First time seller/poster. We received an offer of $640k for our home in Colorado and the buyer presented a letter from their lender that they were approved for $575k. By my math that means they only need to come up with $65k in cash. My real estate agent has concerns about this offer regarding the home appraisal. As long as the appraisal comes in above $575 I should be fine, correct? Or are there other factors I'm missing.
Thanks.
You want your house to appraise for at least $670k. Why is there a concern that the home won't appraise for the offer price? Does your agent think the offer is above market value?
But whether that kills the deal or not depends on your market. Are buyers paying more than what homes are actually worth?
As for being approved for $575k. Before accepting the offer, I'd require proof of funds that they have the $95k to make up the difference between loan amount and purchase price.
You want your house to appraise for at least $670k. Why is there a concern that the home won't appraise for the offer price? Does your agent think the offer is above market value?
But whether that kills the deal or not depends on your market. Are buyers paying more than what homes are actually worth?
As for being approved for $575k. Before accepting the offer, I'd require proof of funds that they have the $95k to make up the difference between loan amount and purchase price.
yes to the bolded.
And also be sure that your contract specifies they are paying that full contract price regardless of the appraisal amount
Otherwise I suspect that they think they will be able to lowball you if the appraisal comes in low, and try to get you to agree to accept the lower amount instead of the offer, or they will use that appraisal with a contingency in the contract to get out of the deal, after having tied up your house for weeks.
Depends on type of loan. If lender wants 20% dn, then it is financing 80% of appraised value, so they would need more money down than planned for originally.
I believe that is correct, as long as the appraisal covers the loan amount, you're good.
Unless it's a 100% loan, the appraisal needs to hit the contract price. Anything less than the contract price is going to require more money down from the buyer unless the seller agrees to reduce price.
Unless it's a 100% loan, the appraisal needs to hit the contract price. Anything less than the contract price is going to require more money down from the buyer unless the seller agrees to reduce price.
Correct. That wasn't the OP's question, though.
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