Appraisal is less then price of Home being bought
A home being sold for 330K was only appraised for 309K by the bank. Should the buyer ask the seller to appraised value by the bank? If buyer walks away does he lose his earnest money?
The buyer should send over an addendum as well as the appraisal to the seller and ask them to reduce the price to $309k
#4 All Forums Contributor
- Plymouth, MI
@Ashish Mehta Yes to the idea of getting the price reduced (see @Ophelia Nicholson )...and maybe to the EMD returned. If you were coming in as a cash buyer, then no. If you were coming in as a financed buyer, then yes since the appraisal being low prevents you from getting financing.
If you were buying this to cash flow (although I don't see how with that high of a purchase price), you could still just buy it if you can come up with the cash difference and the cash flow recovered your cash in (in this case $21k) quickly.
Joe Villeneuve
REcapSystem
A2REIC
thanks for replies. I should have mentioned this is not a investor home and it's being financed by buyer putting down 20% of sale price.
#4 All Forums Contributor
- Plymouth, MI
Originally posted by @Ashish Mehta:
thanks for replies. I should have mentioned this is not a investor home and it's being financed by buyer putting down 20% of sale price.
Then I would point out to the seller the low appraisal and get them to reduce the price...unless your buyer doesn't mind putting up the 20%, plus the $30k difference in cash for a house that they are starting out with underwater.
>This is where I roll my eyes<I
Joe Villeneuve
REcapSystem
A2REIC
@Ashish Mehta The fact that the buyer is putting down 20% doesn't change the answer. The loan goes by whichever is the lower of the sales price or the appraisal. If the appraisal is lower then the lenders loan will be based off 309k not 330. That means if the buyer wants to pay 330k they will have to come up with 21k plus 20% of 309k.
So the answer is to send the appraisal and addendum to the seller asking for a price reduction to 309k.