Home Buying in Hanover>Question Details

Pixeltip, Home Buyer in Hanover, MA

Banks only covering a mortgage at the assessed value, when the selling price is much higher?

Asked by Pixeltip, Hanover, MA Sat Jan 2, 2010

When we were about to close on a house in Hanover, MA, the bank would not cover a mortgage above the assessed value, meaning we would have to come up with the difference (roughly $60,000) to put down at the time of the closing, which we do not have. Is this common, and what can we do to avoid this looking at future properties?

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.’s answer
If you are talking about a current appraised value and stating the bank will not loan on more than that; yes, that is normal. If this is the case, while a second opinion of value is prudent, assuming the end value is less than your contract price; you are overpaying. Don't do it!!
0 votes Thank Flag Link Sat Jan 2, 2010
I am thinking it was the appraised value
0 votes Thank Flag Link Sun Mar 31, 2013
I understand your disappointment I would question was it the assessed value or the appraised value?

The assessed value is the value the local municipality associates with the property for property tax purposes.

The appraised value is the value a licensed appraiser establishes for a property based upon the current market data available. The appraiser takes the condition, location and physical offering of the property in comparison to what has sold in the community usually within the past six months of similar properties.

I have had banks in the recent past challenge the amount of money the bank will lend based upon the appraiser's noted value.

You and your agent most likely reviewed the information provided on the appraisal the bank received which I believe was forwarded to you by your mortgage officer. An appraisal, like a home inspection is a matter of opinion of one party based upon data they review. Many times, as it is all based upon data input somewhere by a human being, human error can happen or square footage, condition and the motivation of the sale have not been properly discerned in relationship to the subject property, this being the home you and your family wished to purchase, it can happen.

When there is a vast difference between the appraised value and the amount of money a seller and a buyer have agreed to then there are ways that this may be handled:
1. The offer is renegotiated between buyer and seller.
2. The bank will issue a mortgage at a risk level they are comfortable with - asking the buyer to put more money down on the sale.
3. The Seller decides to put the property back on the market when they are confident that the appraisal was not a fair market value and that another buyer with another lender will be successful in obtaining the proper mortgage in the future.
4. The Buyer removes themselves from the sale, during their mortgage commitment timeframe and receives all deposit monies back from the Seller (of course the Buyer has lost home inspection, mortgage application monies and appraisal fees).

I would be most happy to discuss this further with. My email is MaryBeth@TradeWindsRealtyGroup.com and feel free to call or text my direct cell at 781-910-7294.
0 votes Thank Flag Link Sun Mar 31, 2013
Pixeltip-
I think we're all curious about whether your loan provider used assessed or appraised value in their decision. As Gregory and Rudy already said, the lender should be using the value from the appraisal, not the town's assessed value. Town assessed values are almost irrelevant to market value. Even where a town assesses at 100% value, the assessed value is 18 or so months old.

In Hanover sale prices with respect to assessed values are all over the place. Below are Hanover single family sales (60) for the last six months from the MLS (Sorry about the formatting):

# Street Sale Price Assessment Tax Year Difference % Sale to Assessed
32 Buttercup Lane 625,000 702,500 2009 (77,500) 89%
265 Silver St 315,000 349,700 2008 (34,700) 90%
204 East St 316,000 365,300 2009 (49,300) 87%
851 Main Street 377,500 386,300 2009 (8,800) 98%
193 Woodland Dr. 405,000 377,500 2008 27,500 107%
736 Hanover Street 298,000 323,100 2009 (25,100) 92%
26 Summer St 196,500 270,500 2009 (74,000) 73%
68 Hoover Rd 275,000 326,300 2008 (51,300) 84%
10 Jutila Farm Path 699,000 700,000 2009 (1,000) 100%
24 Estes Rd 330,000 350,500 2009 (20,500) 94%
228 Old Farm Road 380,000 353,800 2009 26,200 107%
104 LONGWATER DR 647,500 729,800 2009 (82,300) 89%
61 PAT ROAD 295,000 300,900 2009 (5,900) 98%
44 Buena Vista Way 682,000 663,600 2008 18,400 103%
299 Broadway 330,500 320,200 2009 10,300 103%
43 Forest St 910,000 955,000 2009 (45,000) 95%
1194 Broadway 390,000 406,600 2010 (16,600) 96%
36 Bittersweet Ln 368,000 356,000 2009 12,000 103%
32 Shingle Mill Ln 535,000 467,800 2009 67,200 114%
1284 Broadway 310,000 347,000 2009 (37,000) 89%
26 Honeysuckle Lan 765,000 790,200 2009 (25,200) 97%
7 Jefferson Rd. 235,000 281,500 2009 (46,500) 83%
1142 Main Street 413,500 356,200 209 57,300 116%
3 Gardner Way 840,000 863,600 2009 (23,600) 97%
132 Homestead Lan 837,500 893,200 2009 (55,700) 94%
81 Center Street 430,000 361,700 2009 68,300 119%
63 North St 280,000 301,100 2009 (21,100) 93%
37 Karen Rd 455,500 423,400 2009 32,100 108%
612 Broadway 325,000 303,000 2009 22,000 107%
81 Water St 305,000 340,800 2009 (35,800) 89%
94 Tucker Rd 371,750 318,500 2009 53,250 117%
47 Fair Acres Dr 350,000 342,300 2009 7,700 102%
25 Chestnut St 305,000 346,900 2009 (41,900) 88%
41 Hearthstone Way 675,000 580,600 2009 94,400 116%
1072 Main Street 252,838 318,700 2009 (65,862) 79%
85 Bardin Street 375,000 331,600 2009 43,400 113%
1241 Broadway 245,000 313,500 2009 (68,500) 78%
22 Autumn Lane 650,000 595,300 2009 54,700 109%
53 Lally Farm Drive 910,000 904,100 2009 5,900 101%
313 Old Town Way 385,000 347,800 2009 37,200 111%
28 Cheryl Ln 295,000 329,000 2009 (34,000) 90%
171 Plymouth Road 460,000 433,800 2009 26,200 106%
26 Brewster Ln 350,000 333,100 2009 16,900 105%
489 King Street 246,450 309,700 2009 (63,250) 80%
94 Heritage Way 474,250 449,700 2009 24,550 102%
23 Estes Rd 356,500 355,700 2009 800 100%
314 Whiting Street 408,000 363,500 2009 44,500 112%
166 Winter St 194,000 338,800 2009 (144,800) 57%
304 Cedar Street 540,000 525,900 2009 14,100 103%
45 Davis Street 305,000 283,700 2009 21,300 108%
352 King Street 230,000 382,200 2009 (152,200) 60%
7 Riverside Drive 350,000 371,900 2009 (21,900) 94%
441 Whiting St 137,000 287,400 2009 (150,400) 48%
132 Old Farm Road 321,500 341,500 2009 (20,000) 94%
133 Twin Fawn Drive 412,450 384,900 2009 27,550 107%
108 Summer st 241,900 369,700 2008 (127,800) 65%
16 Oakland Avenue 337,000 342,700 2009 (5,700) 98%
19 Miller's Lane 506,000 535,100 2009 (29,100) 95%
47 Deborah Road 475,000 385,600 2009 89,400 123%
Average Sale to Assessed 96%
0 votes Thank Flag Link Sat Jan 2, 2010
Hello Pixeltip,

I'm sorry to hear about your disappointing experience.

The previous answers from the realtors below do an excellent job of explaining the appraisal process and the dilemma buyers face when the agreed upon price is significantly higher than the appraised value. I don't know if you are working with a Realtor, but if you are, it is in your best interest to have him/her provide you with a Comparative Market Analysis(CMA) prior to submitting the offer. House buying and selling is a highly emotional process that requires the science and art of a quality CMA to offset the trend to overspend on the house that you "love". in addition, the rate lock issue can be sticky with fluctuating mortgage rates when the house doesn't close on the date set. Having to go through the whole process of searching for a home can take time that may adversely impact favorable rates.

Did you attempt to renegotiate a new selling price with the sellers? Highly motivated sellers may be willing to significantly reduce their selling price when the reality of the appraised value is understood.

I hope this helps and want to wish you much success in your home search.

PS: Don't get discouraged!

Thomas F. Aubin
Owner/Broker-Brookside Realty Group, Inc.
1130 Stafford Road
Fall River, Massachusetts, 02721
508-678-5055
thomasaubin@brooksideregroup.com
0 votes Thank Flag Link Sat Jan 2, 2010
Hi Pixeltip

The property is what is being used as the collateral for the mortgage. Therefore, no lender is going to lend more than what a property is worth without you making up the difference. An appraisal determines the present value of a home based on the current housing market. If its an FHA appraisal, that will be the registered value of that home for the next 120 days ( 4 months). If the seller is unwilling to sell at that value, then he/she will have to wait another 4 months before another appraisal and value can be ascertain. Not wise. Especially since in the current market the home will probably be worth even less by then.

If you're working with a realtor (and you should be), he/she can provide you with market comparable sales of other similar houses so that you have an ideal of what a home is worth before you place an offer on it. And if those comparables show that the home is alot less than what the seller is asking, see if that seller would be willing to reduce his/her price accordingly first if the appraisal does come in equally as low. This way you'll save yourselves both a considerable amount of time, money, and headaches. Hope this helps and good hunting!
0 votes Thank Flag Link Sat Jan 2, 2010
This has always been the rule.
Banks will lend "X" % based on the the lower of the sales price or appraised value.
You mention assessed value which implies what the town had assesed the home for, which banks really do not consider where those values are stale dated. I believe you are referring to the banks appraisal which in this case came in lower than what was the agreed to sales price.

Going forward, I'd have your Realtor provide you with recent comparable sales prior to making an offer. Another angle might be to get a copy of the appraisal that was done for this original property and review the work and comparables that the appraiser chose.

I'm happy to talk with you more....
0 votes Thank Flag Link Sat Jan 2, 2010
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