When the appraisal comes in short

Mortgage and Lending with Liberty Home Mortgage Corporation Originator NMLS ID 120117

In times when home prices are rising quickly, multiple offers are coming in on a listed property and buyers are having to offer above asking price, it is important to keep in mind the 4 choices which are available to a homebuyer who is obtaining financing:


A key thought in the mortgage industry is that the "value" of the home is the LESSER of the purchase price or the appraised value.  In other words, whichever is LOWER (the purchase price or the appraised value), THAT is the number which the lender works the loan off of.


In this example, let's just assume that the purchase price is $200,000 and the home appraises for $180,000.  Let's also assume the loan is a VA loan and we are going 100% financing with no money down.  On VA loans, the lender gives 100% of the LESSER between the purchase price or appraised value.


In this example, the lender would give the veteran a loan of $180,000.  Even though the purchase price is $200,000, the lender would still only give $180,000.  Now, we have 4 choices:


1) The seller comes down to $180,000.

2) The buyer comes up with the shortage ($20,000)

3) The buyer and seller meet somewhere in the middle

4) The entire deal is off (it would be important to notate that a VA appraisal attaches to the home for 6 months.  In other words, if another VA buyer comes along within the next 6 months, then this appraisal of $180,000 must be used.  If a buyer comes in to go FHA, Conventional or USDA, then this appraisal of $180,000 would not be used and an entirely NEW appraisal would be ordered).


For questions, additional scenarios or to get your buyers Pre-Approved today -- call me at 1-216-780-1103.  I am not only a loan officer, but I am also an underwriter who owns the company and is a direct lender for VA, FHA, USDA and Conventional.




Re-Blogged 1 time:

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  1. Barbara Todaro 05/19/2018 05:12 AM
Mortgage / Finance

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Evelina Tsigelnitskaya
SIB Realty - Sunny Isles Beach, FL
www.SIBRealty.org 305-931-6931

A great loan officer on your side - deal can be done! 

Thank you for a great post. 

May 19, 2018 05:09 AM #1
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, Khash Saghafi great information for all potential buyers to read as well as every real estate agent.... keep these coming...

May 19, 2018 05:11 AM #2
Joyce Marsh
Regal | Christie's International Real Estate - Orlando, FL
Regional Manager Regal Christie's Int'l Realty

Excellent information to share. I was not aware that the appraisal would be valid for 6 months afterward for VA. 

May 19, 2018 05:58 AM #3
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

It can be all about the compromise that is a part of real estate !

May 19, 2018 06:13 AM #4
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Khash - in all aspects of life "stuff happens" and that's when preparation really matters. Good post.

May 19, 2018 05:29 PM #5
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

You have laid out the options and as agents, we hope we don't encounter this often. It is said when the deals fails apart and we all lose.

May 19, 2018 05:40 PM #6
Jane Chaulklin-Schott
TEAMCONNECT REALTY - (407) 394-9766 - Orlando, FL
TeamConnect Luxury Homes - Orlando, Florida, 32836

Yes, of course, in Orlando, Florida we certainly have and are experiencing the scenario of which you write. Thank you for posting the information...wish Cleveland, Ohio wasn't quite so far from Central Florida;  would love working with you.

May 20, 2018 01:59 PM #7
Kat Palmiotti
Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

Yes indeed. The important thing is that there are options if the appraisal comes in lower than the purchase price.

May 26, 2018 03:49 AM #8
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

You are a great resources Khash. Thanks for this - had no idea the appraisal would stand for another 6 months for another VA buyer. Interesting and important to consider. 

May 26, 2018 02:38 PM #9
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Great information, Khash. I always talk with buyers about the options should the appraisal come in low. They need to be prepared, just in case.

Enjoy your weekend!


May 26, 2018 05:09 PM #10
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker and Attorney Licensed in DC, MD, VA,

THank you for this very helpful information - I didn't realize that a VA loan appraisal only attaches to the house for VA loans and not for an FHA buyer later - Good to know! 

May 29, 2018 04:05 AM #11
Pat Starnes-Front Gate Realty
Front Gate Real Estate - Brandon, MS
601-991-2900 Office; 601-278-4513 Cell

Thanks for writing this article as a lot of people are unaware that the house must appraise or the buyer and seller have to look at other options. Is there a scenario where the appraisal can be challenged or contested? How does that work in your state?

May 29, 2018 07:52 AM #12
Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

Khash Saghafi  I am very lucky as I started selling Real Estate in an office that was primarily an appraisal office so I do know the rules . I do explain them to my sellers and buyers . Great info so glad Carol Williams  featured this in SCS

May 29, 2018 01:37 PM #13
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Great illustration of the details of a VA loan.  I'm in the middle of one now.  We'll see how the appraisal goes!

May 30, 2018 02:57 PM #14
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Khash Saghafi NMLS

Mortgage Loan Officer, Cleveland OH NMLS 1114762
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