Tag Archives: sales price

What If The Value Of The House On The Appraisal Is Lower Than The Sales Price ?

Unless you plan on buying a home in CASH and just love it to death.  More than likely you are getting a loan.   It does not matter if you are getting a first time home buyer loan or a loan for investment property.  You will have to get an appraisal, there is no whats or buts.  Normally this is the cost that the buyer will have to bear, and if it has been some time since you have bought a home lets say in the last 3-5 years you will find that the appraisals are a bit more expensive now.   Usually you can look to paying somewhere between $450.00 – $500.00 for an appraisal.

But anyways you will have to get an appraisal, part of getting an appraisal is really for your protection as well as the bank.   The appraiser will not only write up a report on what they think the value of the home you are planning to buy but also to see that there are no safety issues with the home.  For example that it is up to code and the roof is not falling apart, and in California that there is a working smoke detector as well as a carbon monoxide detector.

So lets say the home is for sale for $300k but the appraisal comes in at $280k.  The a couple of things has to happen.  Because even though you may be approved for a $300k loan the bank will only lend up to the appraised value.   So that means if you really want the house you will have to put up an additional $20k along with the down payment you were already going to put down.

Or your agent will send in usually an addendum to reduce the home to the appraised value.  This does not mean that it will automatically be reduced the seller will still have to agree to it.  The seller can say no way this is what I want and put back on the market if you do not agree to it.  Or you can go back to negotiations maybe meet halfway.

Something to just to keep in mind that if you were getting a FHA loan that the value on that home sticks with for 120 days or 4 months basically.  Does not matter what bank you go to when you get an FHA loan it is assigned a case number.  Now if you were getting a conventional and you really think the house is worth more you can try a different lender.  If you were using a broker he will just try a different source if you were using a bank you may have to start the process all over again at a different bank.  The file does not carry over when doing a conventional loan.


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Negotiating To Buy A Home


There is always going to be give and take involved in negotiating when you are trying to buy real estate whether it be buying Santa Maria real estate or any property purchase. That’s why it’s important to have a checklist of what you want to get out of the deal as a buyer. Bear in mind, the home must be appraised and the lender will be looking at the fair market value on a given property in order to be able to give you the mortgage home loan you need to buy the property. Since property values fluctuate, your Real Estate Agent should do a comparative market analysis so you are aware of what the trends are for the area in which you are shopping. This will give you an idea as to whether the seller’s asking price is realistic. The CMA will let you know not only what homes have sold for but what they are selling for near the property and show you how long it took to sell at that given price giving you a pretty good idea of the market. You willwant to know how long the property you are interested has been on the market, and if any price reductions have occurred during that time.

Which Agent to choose Make sure your Real Estate Agent is on the same page with you so he/she is able to represent you properly. You also want to know that you are working with an agent that is experienced in representing the buyer. Not all agents have the ability to provide strong representation for both a buyer and a seller. If you have not yet selected a Real Estate Agent to represent you, then make sure you are going to go with one that can meet your needs.  The real estate industry has gone through many changes and one of them are the agents in the business.  Many are or have to work other jobs or have left real estate only to do it as a hobby but do keep in mind that this may be your biggest investment and that you maybe trying to buy a home for your family, and if you are happy with someone that does real estate only as a hobby is it something that you will be comfortable with.

Remember a good deal is mutually beneficial.

The seller will also have a wish list of what they want out of the negotiation. Listen attentively to determine what their hot buttons are. You can use this information to leverage what you want out of the deal at some point along the way.  Even though home prices have come down dramatically these last few years they are not free and many times buyers feel that they can low ball an offer at any level and that the seller will jump at it.  Any seller is still going to want to walk away from the process with something so knowing what that is, will be instrumental in being successful in buying the property.

Find out if the seller has a deadline. Perhaps they have already purchased their new home, or have to relocate because of a commitment to a new employer, if this is the case he will be a very motivated seller he will still not want to give you the home for free but will be much more easier to deal with and will more than likely accept any offer that seems reasonable and allow you to close much more faster on your mortgage home loan. Find out what the seller’s current mortgage balance is and use this to your advantage, sometimes just like buyers, a seller can be greedy if he does not owe much you can bring this up in the negotiations and let him know he is still going to walk away with a healthy chunk of change.

Something that I do want to make clear in most parts of the country especially here in Santa Maria it is NOT a buyers market just because of all the foreclosures and short sales yes you are getting some great deals.  But inventory being where its at it is a SELLERS MARKET, just not your typical seller usually its the bank holding the cards.  So if you want to low ball an offer because you have been watching a lot of Saturday and late night tv on getting rich on real estate.  Just remember don’t gripe and complain about why your offers are not being accepted.


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