I'm just starting out and am in Tennessee. My sister up in Michigan just put her house on the market two days ago. It was listed for 139, they have an offer of 130 already which is what they actually wanted. Supposedly fair market value for the home in that neighborhood is 125. The realtor is telling her that when a mortgage is applied for that they will only approve 125 so that is ultimately all she will be able to get for it. My question is if the person making the offer has the extra 5,000 to throw in why would they not be able to pay the 130 offer?
@Barbara Bruce If the offer is for $130K and the contract does not say anything about the property having to appraise for the purchase price, then the buyer is on the hook to close the gap. Mortgage will be based on the appraised value, lets say its $125. So the buyer will need to put the needed down payment + $5,000. If the buyer refuses to do so then they would be in breach of purchase contract and would loose their earnest money deposit.
On the other hand, if the contract calls for the appraised value to be at or above the purchase price, then your sister will either have to lower the price or let the buyer out of the contract and return the earnest money deposit.
Mortgage Banker, VA Loan Specialist
National Lender, Federal NMLS# 1374243
The buyer will be pre approved to a certain amount already. The appraiser, hired by the lending institution, will do an appraisal and give the home a value based on recent sold comps near the subject house. Then the lender will only lend up to that appraised value. So if they have the extra money they could still buy the house, it would just come out of their own pockets. That, or the price is negotiated back to the appraised value. Hope this sort of clears that up.
Thank-you gentlemen for quick answers. Your answers were pretty much in line with my thoughts.
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