Home Selling in Fort Myers>Question Details

Eric Klos, Home Seller in Fort Myers, FL

Selling my home...But the bank will not finance the buyer over what it is appraised for..Is this right?

Asked by Eric Klos, Fort Myers, FL Mon Jun 9, 2008

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That is true. Also some lenders now have a special term called an area of declining value. What this means is that if values have decreased by 17% in the past year and it is expected that the values may decrease further the lender may take the appraised value from the appraiser and lower it further to the amount it is believed it will be worth in six months. The appraiser does protect the buyer from paying too much, however the true purpose of the appraiser is to protect the lender. If for example you sell a home for $300,000 but the appraised value is $280,000 then if the buyer is putting down 20% they would have to pay $56,000 and then have to pay $76,000 for the fact that they house did not appraise. Although buyers were doing this in 2005 and 2006, no buyer would do this in a declining market.
1 vote Thank Flag Link Mon Jun 9, 2008
Looks like everyone is stating that this is the right course of action fo rthe bank to take. If you want to buy a car that you know is worth $15,000 (Kelly Blue Book Value), but the seller wants $20,000, why would you want to pay more for it. The same goes with the bank appraised value.

You can dispute the appraisal and pay for one yourself (sort of like getting a second opinion). In this market, appraisals are not being overly inflated as they may have been in the height of the market a few years back.

Sorry to burst your bubble but you're getting opinions that are very similar and home owners find it difficult sometimes to digest market trend information since there is a lot of "pride in home ownership" that comes with this territory. However, banks don't care about the emotional side of this business, they only want market facts that support what their risks are when lending to a buyer.

Carmelo Torres
Web Reference: http://carmelo.ahfsr.com
1 vote Thank Flag Link Mon Jun 9, 2008

I agree with the others. The banks have to protect themselves in a falling market. A year from now that house may be worth only 90% of its current appraised value.

Some info off of MSNBC June 8, 2008---

Cape Coral/Fort Meyers, Fla.---

This area boasts sandy beaches and the laid-back lifestyle that has attracted snowbirds and even luminaries such as Thomas Edison and Henry Ford, who made the area their vacation spot. But it's also been hit hard by the housing crisis. Home values have plunged and foreclosures have jumped a whopping 442% since 2006. It is on Local Market Monitor's list of overpriced markets, with a 34% difference between actual prices and equilibrium; its counterpart to the south, Naples, comes in at No. 1.

Median price end of 2007: $225,300

Median price end of 2006: $258,900

Percent change: - 13 %

Projected change through Q3 2008: - 17 %

Foreclosures in 2007: (1 for every 24 households) 12,880

Foreclosures in 2006: (1 for every 132 households) 2,375

Change in foreclosures: + 442.3%

If it were my money, I wouldn't be making loans on homes there without 30% down.

Good luck
1 vote Thank Flag Link Mon Jun 9, 2008
That is perfectly normal. The bank does not want to loan more than what they think the home is worth.
1 vote Thank Flag Link Mon Jun 9, 2008
A bank will not finance a buyer for any amount over the appraised value of a home. That is correct. The appraisal is completed to determine actual value which is what the bank uses to configure their lending liablilty. If your sales contract is for a higher amount, a few things can happen...
1.) You and the buyer can re-negotiate your contract to lower the price to appraised value.
2.) You, at your expense, can order another appraisal and dispute the original appraised value (only disputable if the second appraisal comes in at a higher value).
3.) The buyer can choose to pay the higher price but will have to come up with the additional money above the appraised value (something that happens in very HOT real estate markets with multiple offers).
4.) You can terminate the agreement and look for another buyer.
Rarely do I see a buyer pay a price above the appraised value. Once a buyer knows the contract price is above the appraised value, they expect some re-negotiations. Their thought is... "why would I want to pay more for a house than it is worth?"

The criteria an appraiser uses to determine value is of SOLD (not pending) comparable properties. If the Fort Myers market has picked up a bit (I know nothing about your market area) then it MAY be reasonable to wait for a few other sales to close which could bring the values up a bit and order another appraisal. Banks have put a lot of heat/pressure on appraisers to not stretch on their valuations in an effort to limit their liability. If they lend too much money on a house and that buyer defaults... they are left holding the note on a house that is worth less than the note.
Depending on the status of your market area (ask your agent about this)... there are a number of ways you could go. You are not alone. Low appraisals have become common place. Hope my answer clarifies for you! Thanks for Posting!
1 vote Thank Flag Link Mon Jun 9, 2008

This is correct, I have owned a mortgage company and also am in real estate and this is very common. The bank will loan off the lower amount (sales price or appraised value). You must drop the sales price down to the appraised value or have the seller bring the difference of the 2 to closing. For example if you sell a place for 110k and the appraisal is 100k the seller must bring in 10k to cover the difference. The seller must also now put down a down payment on the home, the 10k does not count. If you have questions or want to bounce anything off if my, please feel free to contact me.


Scott Riddle
1 vote Thank Flag Link Mon Jun 9, 2008
Yes, it is right. The bank hires the appraiser to estimate the value defined in the report (generally market value). The lender is the client, even though the buyer indirectly pays for the appraisal. The lender will determine the amount they will lend based on the collateral position of the property, and underwriting requirements of that particular lender. Any differences between loan amount and sale price require the buyer to make up the difference, which is not usually done in a buyer's market. This has been typical of real estate financing, except for the crazy market of 2004 to 2006, when they gave the store away. I think it has spoiled us.
0 votes Thank Flag Link Tue Jun 24, 2008
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