Bank appraisals can affect your home in more than one way and with real estate having limited inventory and high demand this will be a problem you face. When a home has multiple offers it sells higher due to people bidding above asking price. Yet once it comes time to apply for a mortgage, the mortgage company faces a problem. They will see your home being worth X when in reality it sold for Y. In turn, the seller has an option to reduce their price or the buyer will have to come up with more money to keep the Loan to Value ratio as per original terms and condition.
For example, you’re selling a home for $500,000, with recent sales that aren’t higher than $480,000. Due to multiple offers, you wind up selling for $510,000. On a 20% down deal, the buyer will take a mortgage of $408,000.The appraisal then comes in at $490,000 which means the borrower’s loan to value is 83%. In order for the borrower to remain at 80% loan to value the bank is only able to lend $392,000. The buyer becomes $16,000 short and will need to come up with the difference to remain at that loan to value.
In the above example one of four things occurs:
- The deal dies
- The buyers will come up with the difference
- The seller will reduce their price
- The issue will be resolved with a combination of the seller reducing or the buyer increasing their down payment.
To avoid these mistakes you’d want to hire a realtor and broker who are local and seasoned. Visit Martino Realty online at 7448 Amboy Road in Staten Island, New York or call (718) 608-9400 for more information.
Image via Pinterest of Realtor.com
