maura_e_black, Home Owner in Richmond, VA

I'm told if my house doesn't appraise to the sales price, the buyer is not allowed to make up the difference in cash on a conventional loan. True?

Asked by maura_e_black, Richmond, VA Wed Dec 5, 2012

This makes no sense to me, because all a lender should care about is the LTV, and the market would never rise if houses could only sell at the appraised value or below, even if the buyer was willing to put in more cash.

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Betty Hesaltine’s answer
Hi Maura,
The museum district is a tricky area. As you know your house may be completely renovated but the house right next door which sold a month ago and will be used as a comparable had not been touched in ages. Your Realtor should be able to help out by asking the appraiser questions before allowing them access to the property for the appraisal. They should be making sure the appraiser works in the area, and knows the houses from within. If that is not the case, they should request another appraiser who works the museum district more frequently. You cannot request a specific appraiser, as the lender cannot talk to the appraiser, but you have the right to veto an appraiser before they have access. An appraisal based on statistics and MLS photos only may not be in your best interest.
It is my impression that the lender may allow the buyer to put more money down on a conventional loan, but each lender/bank has their own "layers" which may not allow this procedure. Another lender may be an answer.
Good luck!
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1 vote Thank Flag Link Wed Dec 5, 2012
Hi Maura,

That's not true at all. Of course you can pay the differnce if the seller is not willing to adjust the sales price. The monies you pay for the overage will not be counted towards your down payment, so if you are trying to put 20% down, you will need to add the overage to your down payment. I of course would recommend you get the seller to lower the sales price first. If you are getting an FHA loan on the home, the appraisal stays wth the property for six months and therefore the seller will not be able to sell it to someone else getting an FHA loan above appraisal price. Secondly, I would try to challenge the appraisal if the seller is not willing to lower.

Give me a call and I would be happy to help guide you.

Ryan C. Sanford
Associate Broker, CDPE
RE/MAX Commonwealth
The Ryan Sanford Team
9401 Courthouse Road, Suite 200
Chesterfield, VA 23832
804-218-3409 mobile
804-777-9001 office
804-423-2392 e fax

FTC Required Disclosure:
This communication is provided to you for informational purposes only and should not be relied upon by you. RE/MAX Commonwealth and Ryan Sanford is not a mortgage lender and so you should contact your lender directly to learn more about its mortgage products and your eligibility for such products.
0 votes Thank Flag Link Wed Dec 5, 2012
I have closed many deals this year with buyers bring the differance between purchase price and appraised amount. However, in Michigan if a buyer is using the MSHDA grant, they can not use those funds to bridge that gap.

I m with Theresa, seek out a new lender. Also many time appraisals come in low due to the tight margins a particular lender may have have and the buy back requirements imposed upon them shuold the borrower default. Appraisals can swing quite a bit.
1 vote Thank Flag Link Wed Dec 5, 2012
Sadly it doesn't matter how you feel about the home. The sales value is based on the appraisal. 6 month sales for comps is the norm, I'm not sure why you were told 3 months.

If it does not appraise and you get a back up offer, you will have the same issue with the next buyer. No one is going to pay more for a home than it's worth and just like someone shopping for a car or a TV, they want the best price.

In cases like yours where the sales price and appraisal are possibly so close, I recommend a pre-listing appraisal for my clients. That way they see what the home will be valued at and hopefully it relieves this issue later when we have an actual offer. Good luck!!
0 votes Thank Flag Link Wed Dec 5, 2012
You are obviously the Seller based on the question, not the buyer.
Call a loan officer. I can clearly see how that would not work with a conventional loan for numerous reasons but that is outside our realm of expertise.
0 votes Thank Flag Link Wed Dec 5, 2012
I agree with Ryan. If the seller thinks the appraisal is incorrect and undervalued he or she could ask for a review of the appraisal or pay for the second appraisal. In my experience most appraisers are not willing to change their appraisal, and all second appraisals do is cause the need for a third appraisal. So, as a seller you have to feel very strongly that the appraisal is egregiously incorrect and the appraiser has used absolutely wrong comparables or methodology. Sometimes the market just isn't where we want to sell a property for.
0 votes Thank Flag Link Wed Dec 5, 2012
Of course the buyer can pay more than appraisal. It must show on the closing statement..
Bill Hastings
0 votes Thank Flag Link Wed Dec 5, 2012
Put the shoe on the other foot, how much above value to you pay for stuff? That is a loan officer question.
0 votes Thank Flag Link Wed Dec 5, 2012
If I want it, I will pay more, and given that it's a unique 100 year old home in superior condition, I did! It's not a loan officer question because I know the LTV will remain the same for the lender and was only asking if the buyer can kick in more cash.
Flag Wed Dec 5, 2012
Thanks! I'm the seller, and while I think it will appraise above the sales price, I can't be sure because it's pending. I have no intention of dropping the price, because I believe the value is there and I've had several offers. Logically, let me put it this way. If it appraised 20,000 above the sales price, would the buyer be willing to adjust? Exactly - no! I do feel that I have a very nice property that is valued by the buying community and in a great location. Also, someone is preparing a backup offer. (Note that I am just preparing mentally for any situation)

One thing concerning me though, is that I was also told the appraiser can only use comps from the past 3 months and in the Museum District that will be difficult. This also makes no sense to me, and I would think 6 months would be more appropriate even in a changing market (particularly at this time of year with fewer sales). Thoughts?
0 votes Thank Flag Link Wed Dec 5, 2012
If the seller is not willing to lower the price to the appraised value, you can add more money down; for any necessary clarifications consult with your loan officer...
0 votes Thank Flag Link Wed Dec 5, 2012
It really does depend on the lender and the loan. Has the buyer considered changing lenders?
0 votes Thank Flag Link Wed Dec 5, 2012
It would depend on the lender and the loan.
0 votes Thank Flag Link Wed Dec 5, 2012
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