03-18-2012 09:50 PM - edited 03-18-2012 09:58 PM
03-18-2012 10:12 PM
They do not need to sell at a lower price.
Generally this means that your lender will only lend based on the appraised amount so you could need to come up with the difference. For instance, if you are putting 20% down then they will only lend you 80% of the appraised amount ...and you would need 20% down + the difference of the appraisal and actual sale price....If the sale price is $105K and the appraisal is $100k, then the lender will make a loan of $80k and you would need $20k+ 5k = $25k down.
However, in many contracts it is stipulated that if you cannot fund at the sales price then you can back out...but typically your agent should help you to renegotiate a fair agreement....If you do not know what is in your contract then you should ask your agent, and get their advise.
I think it is rare for the seller to be rigid with the price in this circumstance because if you back out a future buyer could have the same funding problem at the same price unless they are buying with cash or willing to increase their down payment,
But if the seller has many interested buyers they might feel they do not need to negotiate as much.
03-19-2012 10:50 AM
Good to know this. What happens if the home is appraised for a higher value, say 110K in case of your example when the selling price was 105K?
You do not need an appraisal unless you are getting a loan. The lender is the one that requires it so if you are paying cash it is optional.
So when a lender gets an appraisal for equal or more than the agreed sales price, they will be able to fund the loan amount (unless there is some other reason for not approving the loan).
In the past, if the house appraised for more then the loan amount the buyer may have been able to take out a slightly larger loan and use the excess money to pay for fees or other uses (of course you would have higher monthly payments).
But I am not sure if they do this much anymore due to all the stringent lending standards now. Someone in the lending business could better answer this. (you can try contact loansbyJW who is a redfin approved lender and often posts in the southern california forums: http://www.redfin.com/openbook/home-loans/southern
03-27-2012 04:11 PM
In the process of buying myself and like most buyers, asked these same questions. The very short answer is, the bank is typically going to base its lending off the lower of the two figures, the purchase price or the appraisal.
In the case of an appraisal coming in high - congratualtions, you got a good deal and have some more initial equity. The bank will still base its lending off the contract price and things like your down payment, PMI ( if applicable ) and fees would be reflective of that.
But again, I'm neither a broker or an agent. I would inquire with your lender and/or agent to verify - make 'em work for you!
04-07-2012 05:17 PM
My husband and I went thru this very thing in 2009, and the seller refused to budge. We walked. A few weeks later, the house sold for the appraised value plus a little more. Seemed highly unethical then, as it does now. Greedy ba$tard$. In the end though, we ended up with a much nicer house in a better neighborhood, and had a (painful) learning experience.