Home appraisal question

[LuluLovesDisney]

When buying a home, the bank needs the home appraised. I understand this is because they will only loan up to 80% of the appraised value of the home. So, if a home comes out much lower than what the buyer is in contract for, they may not get the money that they need for the loan to go through. From what I read on the internet, in that case the buyer can come up with the money or the seller can reduce the price to comply. Now, my question is what happens if the appraisal comes out higher than the agreed upon price in the contract? I haven't been able to find anything on that.

 

[clh2]

We had that happen

Our house appraised for about 3% higher than the purchase price.

Absolutely nothing happens. You made an offer to purchase, the buyers accepted it. Your house is worth more than you offered to purchase it for. So - you have a little extra equity in your home once the transaction is completed.

 

[Lisa loves Pooh]

My understanding is that the seller must honor the sale price--unless they have a contingency of their own.

But I wouldn't ever sign a contract where the seller would make me pay more pending appraisal. The price is negotiated BEFORE the contract is signed.

The reason that a buyer can get out for too low of a appraisal is usually tied to a financing contingency.

 

[2005s4]

As long as you have a signed contract (both parties have signed), not an offer.. then the seller has to sell the house for the agreed upon price. This happens all of the time. (Luckily I usually have the buyers!)

 

[kathie859]

When buying a home, the bank needs the home appraised. I understand this is because they will only loan up to 80% of the appraised value of the home. So, if a home comes out much lower than what the buyer is in contract for, they may not get the money that they need for the loan to go through. From what I read on the internet, in that case the buyer can come up with the money or the seller can reduce the price to comply. Now, my question is what happens if the appraisal comes out higher than the agreed upon price in the contract? I haven't been able to find anything on that.

I don't know what lender you are using; however, higher LTV (loan to value %) mortgages are available in the market place. i.e., VA loans are up to 100% financing; FHA only requires 3.5% down; and conforming can be as little as 5% down.

 

[Muushka]

I don't know what lender you are using; however, higher LTV (loan to value %) mortgages are available in the market place. i.e., VA loans are up to 100% financing; FHA only requires 3.5% down; and conforming can be as little as 5% down.

I would love it if they went back to the good old days. 20% down, end of story. The 100%, 96.5% and 95% financing is what got us into this financial mess (well that and greed).
No offense to you Kathie, just wondering when in the world they are going to make home ownership something that is a true commitment from the home buyer, and stopping the madness!

 

[kathie859]

I would love it if they went back to the good old days. 20% down, end of story. The 100%, 96.5% and 95% financing is what got us into this financial mess (well that and greed).
No offense to you Kathie, just wondering when in the world they are going to make home ownership something that is a true commitment from the home buyer, and stopping the madness!

I think I know where you're coming from------BUT the mortgage financing available NOW is not the "high risk/no doc/no income verification/any ol' credit score works" programs of years past. Those programs deserve to "hit the dust". I just think it's impractical to assume that every citizen has the ability to save up 20% down payment. The programs available now require higher underwriting standards. And that's a good thing. I'd rather see a person take their 3.5% down and get a solid FHA mortgage if they have a decent score and a reasonable Debt to income ratio or see a veteran take advantage of his VA benefit to purchase a home (again there ARE underwriting qualifiers for these mortgages) than make people save up 20%.

 

[Muushka]

I hear what you are saying and it does make sense. But I recently heard that Fannie and Freddie are up to their old tricks of giving mortgages to those who cannot afford them. I hope my info is wrong and you are right!

 

[flakypuff]

Hello...
My DH is a Home App.
If the home value is higher than the agreed price than that just means the person buying the house will have more equity...they may also
have to come up with a little less money out of pocket.
It is not going that way so much lately. Since the home values have fallen so much most of the time the value is less than sale price. This is why people
should strongly think about getting a appraisal done to find the value before they list the house. That doesnt mean from the realtor. I mean a true vale report. This helps so there are no shocks It can be very hard for a seller when they ask a price and get it and then when the buyer tries to get funding the bank will only give a % of the value....in many cases the buyer will have to come up with more money and then the deals falls apart. I hope I didnt confuse you

 

[LuluLovesDisney]

Thank you so much! I was just wondering if there was any impact with a higher appraisal and I appreciate all the answers. It seems like it will not affect me except for possible increased equity in the home.

IDK about all banks, but I can tell you for me, since the prop was not FHA approved, a 20% dp was required, unless you wanted to go through another million hours of paperwork to get PMI and in that case you needed 15% minimum. They checked every aspect of my financial life possible and even ran TWO credit checks on me (one for preapproval, one for actual approval just 3 weeks later) I needed all my bank statements and paychecks from the past 2 months, lots of background check type info. It made me feel good they were being so peculiar about it, but I'm worried not everyone does this from what I hear.

 

[SandrA9810]

If you borrow more than 80% of the home value, you have to pay PMI.

Part of what was happening in the past, people would go through one lender borrow 80%, then through another lender and borrow 20%. And then there wouldn't be any PMI or protection against the mortage.

You have to have a credit score of 620 to get an FHA loan. It might be 720 for a conventional, I remember the realtor saying something about needing a 720 score for some sort of loan.

 

[kathie859]

If you borrow more than 80% of the home value, you have to pay PMI.

Part of what was happening in the past, people would go through one lender borrow 80%, then through another lender and borrow 20%. And then there wouldn't be any PMI or protection against the mortage.

You have to have a credit score of 620 to get an FHA loan. It might be 720 for a conventional, I remember the realtor saying something about needing a 720 score for some sort of loan.

I don't know any lender giving an 80/20 mortgage anymore. These programs have bit the dust for the most part. There may be an independent lender who may do it--but no one that I know. And most lenders have programs to "buy out" the PMI via a fee or a slightly higher rate.

Actually, FHA loans are NOT credit score driven; however, most lenders set a base score that they won't go below. For most it's 620 or 640. On the conforming mortgage side, your rate is set by your % down, your credit score and property type (single family, 2 family, etc) and purpose of property (primary residence, investment, owner occupied or not).


Flakypuff---I feel for your Dh right now. The appraisers are being set upon by the new mortgage rules and everyone is being affected. Every lender is being painted with the same brush. I used to be able to call an appraiser with a question but I can't even talk to one anymore lest I appear to be "influencing value". Appraisers got blamed for a lot of the perceived inflation of values in the last several years and that's just hooey!