You can always hold out for another buyer who might have more cash to put down or a better bank / appraiser. Sucks.
Well he upped the price, but we're not sure how much. He said he had to fax it to the bank first and we would find out through them.
Vic - Why is the buyer's loan officer upset about this? Wouldn't it benefit them for less risk?
Vic - Why is the buyer's loan officer upset about this? Wouldn't it benefit them for less risk?
Ah, so you're saying if I stick to my guns with my original purchase price, than they may not be able to. If I offer to reduce down to the appraised cost, then we should be ok?
alkemyst
No Lifer
- Feb 13, 2001
- 83,769
- 19
- 81
man both of you are confusing.
A bank tries to qualify the buyer. This is a factor of what they can afford and what they can appraise your house for.
Normally this is probably a 20% spread. Which is a lot.
If you think you can get better money then hold out.
Today's market is a bad time to sell at a killing though.
According to the book Home Buying for Dummies, 20% down was the number lenders found tended to protect themselves from significant loss if borrower defaults.
Since home is collateral for loan, if bank thinks home prices will continue to decline in your market over their anticipated life of loan (7 years?), their low ball estimate may be right on target (maybe there appraisal reflects 80% of what they think house might be worth years down the road?)
Since home is collateral for loan, if bank thinks home prices will continue to decline in your market over their anticipated life of loan (7 years?), their low ball estimate may be right on target (maybe there appraisal reflects 80% of what they think house might be worth years down the road?)
Aharami
Lifer
- Aug 31, 2001
- 21,205
- 165
- 106
houses are always appraised lower...my townhouse is appraised at $170+, its on the market right now for $299k...make no difference to me as it is what the market dicatates. I want a lower appraisal so my taxes are less.
Not true at all.
You are probably thinking of a tax appraisal, which is a totally different beast than a real estate transaction appraisal. What a tax appraisal is supposed to mean can vary from county to county, and appraiser to appraiser-- but in a lot of circumstances has absolutely nothing to do with the value of home to a potential buyer.
Chaotic42
Lifer
- Jun 15, 2001
- 34,809
- 1,990
- 126
I'm a buyer going through this process right now (the appraiser got paid today), and if your townhouse appraises at $170K, that is the largest risk that a buyer's bank will want to take, because if the buyer defaults, the bank wants to make sure that it will at least get its initial investment back.
Unless you know of someone walking around with $300K in their pocket ready to buy, I'm not sure that having a lower appraised value on your home is a good thing if you are looking to sell.
It is 20% down because of federal law. Federal law prohibits banks from requiring mortgage insurance if loan to value is under 80%.
This is the last time I allow a FHA loan to purchase my house. Next time they'll need at least 10% down."
House is collateral for loan.
Lender is probably conservatively looking at what the house may be worth down the road, and is adding in "equity" (e.g. will only lend for 80% or less of anticipated value of home down the road) so if borrower defaults, they can hopefully at least break even after all transaction costs and liquidation of home.
EDIT: what did your realtor think about purchase price? Was it wow you got a great price, that was a fair price, or the buyer is getting a great deal?
More importantly, what does that person think you would have to drop price to get a quick sale? Do you have another home lined up to purchase, and what type of value does it represent? (are you basically trading up where both properties may be % discounted from fair market value)
And have you lived in current house for at least 2 years so all proceeds from sale won't be subject to federal income tax?
Take the emotion out of it and just view it as a pool of capital to be redeployed? What is my rate of return and carrying costs of holding property till fall selling season? Is property I currently have lined up for purchase and mortgage terms I got represent really good value?
How much is current buyer's lender willing to let him borrow? If he comes up with some more downpayment, and you come down in price slightly, will lender accept that? Or is borrower bundling 3 - 6% of closing costs into loan amount? If so, perhaps, you can offer closing cost assistance instead so loan amount goes down and perhaps overall ratios become acceptable to bank? (don't make this an open ended I'll pay all closing cost because that may just tempt lender to really pad closing costs to maximize their profit; ask your realtor what fair amount of maximum closing cost assistance is)
And if after rejigging everything (seller brings up bid, you essentially drop price, either overtly or via paying for closing costs), you are very close to amount lender will lend, what is commission your realtor and buyer's realtor were expecting? If full 6 %, perhaps, they could each cut their 3% cut to 2% to make deal work for everyone?
Historical Affordability Data:
http://realestateconsulting.co...tter=Local/local200706
http://realestateconsulting.co...tter=Local/local200803
House is collateral for loan.
Lender is probably conservatively looking at what the house may be worth down the road, and is adding in "equity" (e.g. will only lend for 80% or less of anticipated value of home down the road) so if borrower defaults, they can hopefully at least break even after all transaction costs and liquidation of home.
EDIT: what did your realtor think about purchase price? Was it wow you got a great price, that was a fair price, or the buyer is getting a great deal?
More importantly, what does that person think you would have to drop price to get a quick sale? Do you have another home lined up to purchase, and what type of value does it represent? (are you basically trading up where both properties may be % discounted from fair market value)
And have you lived in current house for at least 2 years so all proceeds from sale won't be subject to federal income tax?
Take the emotion out of it and just view it as a pool of capital to be redeployed? What is my rate of return and carrying costs of holding property till fall selling season? Is property I currently have lined up for purchase and mortgage terms I got represent really good value?
How much is current buyer's lender willing to let him borrow? If he comes up with some more downpayment, and you come down in price slightly, will lender accept that? Or is borrower bundling 3 - 6% of closing costs into loan amount? If so, perhaps, you can offer closing cost assistance instead so loan amount goes down and perhaps overall ratios become acceptable to bank? (don't make this an open ended I'll pay all closing cost because that may just tempt lender to really pad closing costs to maximize their profit; ask your realtor what fair amount of maximum closing cost assistance is)
And if after rejigging everything (seller brings up bid, you essentially drop price, either overtly or via paying for closing costs), you are very close to amount lender will lend, what is commission your realtor and buyer's realtor were expecting? If full 6 %, perhaps, they could each cut their 3% cut to 2% to make deal work for everyone?
Historical Affordability Data:
http://realestateconsulting.co...tter=Local/local200706
http://realestateconsulting.co...tter=Local/local200803
Well we got the report back. He changed the value by +$2000 which was good. Not as much as I was hoping, but better than nothing. We are at ~97% of asking price, so were gonna sell.
Aren't appriasals nothing more than an opinion? Some ppl may have a higher or lower opinion than others. There are subjective variables in the equation too, no? Aren't appraisals more art than science? Who is to say what the true value of anything is? The value should be whatever someone is willing to pay for it.
Slew Foot
Lifer
- Sep 22, 2005
- 12,379
- 96
- 86
The problem is that people dont use their own money to buy homes (for the most part), so what someone is willing to pay is not necessarily the value of the home. The lending banks (who is actually buying the home) appraisers job is to put a value on the home, so the bank knows how much money to lend out.
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