When you apply for a mortgage, the bank has a professional appraiser perform an appraisal of the property. The question today is: what if the appraisal comes in lower than the price you have agreed to pay? And the answer, like the answer to many questions, is: “It depends”. Mostly, it depends on what it says in the mortgage contingency that was part of your offer.
For the purposes of this discussion we will use – as an example – that:
– you have agreed to pay $600k for the property.
– the bank will lend you up to 80% of the appraised value – which is standard.
Owners who try to sell their home without an agent are frequently successful in getting a signed contract from a buyer for an acceptable price. Unfortunately – all too often – they learn the hard way about the number of problems that can come up and interfere with getting to “SOLD”. A contract that doesn’t close typically has a negative impact on the purchase price of the next offer…future buyers tend to be very suspicious of why the first offer didn’t get to “SOLD”. Here are some of the many ways that a good agent can help you navigate through the sea of problems and get you to “SOLD”.
If you apply for a mortgage for your home purchase, the bank or lender will require an appraisal of the property. Here is a list of some basic questions and answers about appraisals. For the sake of simplicity, we will assume the most typical scenario: the appraisal is for a mortgage for 80% of the purchase price, and you will be covering 20% of the purchase price from your own money. If you need to borrow more than 80%, or have enough of your own money to borrow less, the basic concepts are the same but. there are some significant differences. We will cover the less typical situations in future posts.