How often lately have you heard those dreaded words "The Property Under Appraised"? I am lucky to work with Realtors that are excellent at what they do, and who are conservative in their estimate of what a property is worth. So I do not hear "The Property Under Appraised" very often, but when I do it usually creates a major issue.
Let's face it, with property values declining, many times the Seller does not have much wiggle room, and a reduction in price can result in the Seller walking away with little to no profit from the sale of their house. The Buyer is also put in a bind when " The Property Under Appraises". Buyers these days are usually trying to scrape up every dollar that they can to be able to come up with Downpayment and Closing Costs, so when " The Property Under Appraises" they also have a major problem.
This was the situation in one of my resent deals, "The Property Under Appraised" for $5,000 on a $250,000 sale. When the appraisal came in everyone started to look over the appraisal to see if they could make a compelling case for the Appraiser to make an adjustment to the appraisal. Both Listing and Selling Realtors came up with additional comps that they felt the Appraiser should take into consideration, but in the end the Appraiser would not budge.
Neither the Sellers nor the Buyers had much flexibility. The Sellers were contributing $7,000 towards Closing Costs, and were very close to breaking even on the sale. The Buyers were already getting Gift Money to be able to come up with the Downpayment. The Buyers did have a little money that left in the bank, but did not want to be left without a few dollars to fall back on in case something went wrong after they moved into the property. Something had to give in order for this deal to happen, because we could only lend up to the appraised value of the house. So what was the solution?
The Sellers lowered the price of the house to $245,000, and lowered their contribution towards Closing Costs by $2,500. Our secondary department then allowed me to change the interest rate form the rate we locked at, to one that I could give the Buyers a credit towards Closing Costs, in order to keep the deal together. By going to an interest rate that was only .25% higher, and had very little impact on the Buyers monthly payment. By doing that I was then able to give them a $2,450 credit towards their Closing Costs. I now have to very happy Borrowers, who had smiles from ear to ear at the Closing, and who have already referred a couple of their friends to me.
Was this the most difficult deal that I have had to come up with a solution to keep together, no. But it is one that we are seeing more and more of these days, and hopefully providing this solution in this blog, will help others to see if the same would work for them, and help them keep their deal together when they hear the words "The Property Under Appraised".
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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