What are the repercussions of a low appraisal when trying to buy or sell a home?

Asked by Trulia San Antonio, San Antonio, TX Thu Mar 28, 2013

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Jesus Soto, Agent, San Antonio, TX
Thu Mar 28, 2013
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It's quite simple,and one of three things should happen:

1-Contract should become cancellable
(Meaning no sale)
2-contract should be renegotiated for appraised value.
3-contract continues with bank financing appraised value, and buyer paying difference between appraised value and contract value out of pocket.

Hope this makes sense. If not, give me a call.

Jesus Soto
Exit Realty Partners II
2108436053
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Tony Grech, Mortgage Broker Or Lender, Southfield, MI
Fri Mar 29, 2013
The appraised value dictates the maximum amount you can finance. If you are only putting 3.5% or 5% down, then most likely the answers below are your main options.

However, if you are putting more than that down then as a buyer you could elect to move forward with the transaction and potentially have to pay a higher rate and/or be saddled with additional PMI as opposed to making up the difference out of your pocket.

For example if you were buying a home for $100,000 with $10,000 down payment (10% down) and the home appraised for $95,000. Now your $90,000 mortgage represents a 95% LTV. Your rate would be a little higher due to the LTV and you would pay more in PMI.

As a buyer there are few cases where you would want to pay over the appraised value of the home, but it's an option if you just need to have this particular home.
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Don Groff, Agent, Austin, TX
Thu Mar 28, 2013
Jesus is correct. Those are your options. The buyer's can can also dispute the appraisal value with the lender but that is a very difficult thing to overturn because they essentially go back to the appraiser and he has to admit a mistake on his part. While this is a battle than can be won at times it is a low percentage option. It's also not an option that most buyers will want to try.

Depending on the value you may be able to negotiate the price lower and meet somewhere in the middle between the original purchase price and the appraised value.

Hope this helps.

_____________________________________________________
Don Groff | REALTOR® & Mortgage Broker
Austin Real Estate Pros & 360 Lending Group
o 512.669.5599 | m 512.633.4157 | listings@dongroff.com
websites: http://www.AustinListed.com | http://www.360LendingGroup.com
Web Reference:  http://www.AustinListed.com
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