Elizabeth Mi…, Home Buyer in S Y Jackson, Albuque...

Anything over HUD asking price is a fee??

Asked by Elizabeth Miffleton, S Y Jackson, Albuquerque, NM Wed Oct 9, 2013

My realeatate agent explained to me that anything over the asking price on a HUD home not only has to come out of pocket (which I'm ok with) but it will not reduce the price of the home, its a fee? For example if we offer $138, 000 on a $130, 000 asking price. I have to put $8, 000 out of pocket plus 5% which is $6900 but my loan will still be $131100??? So the $8, 000 is a fee but is also financed? How is yhis possible?

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Your loan value can be no more than some percentage of the appraised value, depending on the loan you are selecting. The money you pay over the appraised value is applied to the purchase price.

For Example, you are buying the home at $138,00. It is appraised at $130,000. Your loan requires that you put 5% down OF THE APPRAISED VALUE. So you need to bring in cash the 5% of $130,000, or $6500 plus the $8,000 for a total of 14, 500. That doesn't talk about other closing costs but that's the minimum that must be brought in.

Hope that helps?
1 vote Thank Flag Link Thu Oct 10, 2013
Hi Jim: I hear ya. When buyers call me and the first words out of their mouths are: We want to buy a foreclosure, I listen to them for a while and then intersect: What you WANT is a good deal. You DON'T really want a foreclosure. Besides, there aren't very many of them and they are priced at market. This brings things into perspective. Somewhere, buyers get the idea that banks are stupid. Greed driven, perhaps, mismanaged perhaps, but not stupid.
0 votes Thank Flag Link Sat Oct 12, 2013
there is an urban myth that all foreclosed properties, especially government owned foreclosure properties are cheap bargains compared to the "normal" listings.

The key phrase is "urban myth" The key word in that phrase is "myth"

If it is appraised at $130,000 that may already be close to the market value. Might be a little low, or a little high,

And gee, no. It can't be both "out of pocket" AND financed.
0 votes Thank Flag Link Fri Oct 11, 2013
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
It sounds like your purchase price is $138,000, your down payment is 5%, however, the real value of the property, based on HUD appraisal is $130,000. On a side note, $8,000 is not a fee, it is optional - if you want to pay it - go ahead and pay, and if you don't want to - you don't have to (although your offer may or may not go through in that case).

Lending is usually done, as mentioned by another agent below, by using whatever is lower - the purchase price or appraisal.

This means that your loan should be 95% LTV of $130,000 or $123,500.

Best of luck,

Irina Karan
Beachfront Realty, Inc.
IrinaKaran@gmail.com
0 votes Thank Flag Link Thu Oct 10, 2013
Basically what you have is a low appraisal that you know about early in the process if you are going to use FHA financing. Loans amounts are always calculated on the lesser of the sales price OR the appraised value.

FHA will not allow a new appraisal, but other loan programs will require a new appraisal, and will then use the new appraised value to determine the loan amount.
Web Reference: http://www.SacRELender.com
0 votes Thank Flag Link Thu Oct 10, 2013
No Hud asks for the appraised value, so the difference needs to be paid in cash, it is still your money.

If you do a conventional loan and if the house appraises you will not have that problem, but HUD will not throw in a free termite clearance.
0 votes Thank Flag Link Thu Oct 10, 2013
I would imagine that you are putting down 3.5% of the sales price, right? But then your loan contains mortgage insurance, so the balance is increased. On top of that, you've got closing costs, which most likely exceed 1.5%, so I am confused as to where your 5% investment is distributed.

But the extra $8,000 you are willing to put into the transaction goes directly into HUD's pocket, to answer your question. And right now the government can use all the money it can get, LOL.

This must be some special house to be willing to pay $8,000 over market value for it. I would even question the value that HUD assigns as those appraisals tend to be high.
0 votes Thank Flag Link Thu Oct 10, 2013
My suggestion to you is to sit down with your lender and run the numbers, there are probably more factors than are presented here and only they know your unique scenerio..

HUD has an FHA appraisal completed on their properties, so they (and the Buyer ) know what the value is for an FHA loan and that the property will qualify for an FHA loan ( that is the insurable, insurable with repair or uninsurable language in the listing) If the Buyer offers over the amount of the appraisal the Buyer has to pay the difference between the appraised amount and the offered amount, plus 3.5% downpayment based on the appraised amount, plus closing costs, PMI and any other fees or expenses.

HUD usually doesn't like to see over appraised value offers, but want to see the best net for the value.

My question to you would be why are you willing to pay almost 6% over appraised value?
0 votes Thank Flag Link Thu Oct 10, 2013
HUD homes before listed have an FHA appraisal done on the home. It is usually listed at the FHA appraised value. If you are getting FHA financing then the max the lender can loan on it is for the appraised value minus the down payment. If the buyer offers more than the list/appraised value then the buyer would have to come out of pocket for the difference. Since you are putting a % down the loan amount cannot change based on the higher purchase price. It's based on what the home appraised at.
So if the home appraised at $130k. The max loan on it for FHA would be $125,450. If you offered $138k. Your loan amount would still be the same but you would just have to bring in an additional $8k.
If you are doing a conventional loan then it would be based off of the new appraisal.
I would talk to your lender and Realtor again to get clarification.
Hope this helps.
0 votes Thank Flag Link Thu Oct 10, 2013
$138, 000-8, 000-6900 doesn't equal 131100...
0 votes Thank Flag Link Wed Oct 9, 2013
No what I'm asking is where does the $8, 000 go? He says it does not reduce the principal of the home, which doesn't make sense to me, where does that money go then?
0 votes Thank Flag Link Wed Oct 9, 2013
David is correct, but you should also be aware that this only applies to FHA loans. If you can qualify for a conventional loan you can have a new appraisal and use that value to calculate your LTV. If you and your agent feel that the value is greater than the HUD value it may be worth trying this scenario. Speak with your lender about your options to switch to a conventional as see if this helps you out.
0 votes Thank Flag Link Wed Oct 9, 2013
Hi Elizabeth. Your agent is right but maybe you are misunderstanding it. HUD homes are appraised before being listed , therefore you know anything over appraised value will have to be out of pocket. This portion is not and can not be financed. Your loan will be 95%of $130,000 appraised value.
Hope this helps.
0 votes Thank Flag Link Wed Oct 9, 2013
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