Thursday, August 31, 2006

What to do when appraisal doesn't match purchase price

Most home buyers need a mortgage to buy a home. Before a mortgage is approved, the lender or mortgage broker usually hires an appraiser to verify the market value of the property. Ideally, the appraised value matches the price the buyer has agreed to pay.

When a property appraises for less than the purchase price, the transaction can be in jeopardy. However, a low appraisal won't necessarily stand in the way of the lender granting the loan if the borrowers are making a large cash down payment.

For example, let's say you agree to pay $1 million for a property, and you have $300,000 for a down payment. The appraiser puts a $950,000 value on the property, which is less than you've agreed to pay. You're a well-qualified buyer, so the lender is willing to give you a loan for 80 percent of the appraised value, or $760,000.

With a $300,000 cash down payment, you only need a $700,000 mortgage. So, the sale can proceed unless you have a problem buying a property that appraised for less than you agreed to pay.

Read the entire Inman News article at Citywide Services

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