mortgage apparaisals

i didnt realize that after you go to contract the bank sends an appraiser to come up with a price they think the house is worth and that price needs to be equal to or above your purchase price in order to get your mortgage approved.
is this a normal process (has it been explained to me incorrectly - this house stuff is foreign to me).

is it common for an appraisal to come in less than the contract price? if so, what happens?

mortgage apparaisals

Yes, it's 100% normal and NECESSARY in order to get a mortgage. When DH and I bought our house, it was appraised at $50K more than what we paid for it, which was pretty typical at the time (appraisal was done almost 2 years ago now). It's actually going to help us with regards to our PMI - we SHOULD have had NO PMI, but our mortgage broker didn't realize this until right before our closing and we didn't want to push it back. We had to wait for 1 full year of payments before we could request and just need to do another appraisal (about $400), which we plan on doing as soon as our kitchen work is done.

Re: mortgage apparaisals

If your appraisal comes in lower than the purchase price or loan amount.

The Sellers have to adjust the sales price or the bank won't process the loan. This happened to my Friends 10 years ago when they bought there house. The Sellers weren't happy about it but they had no choice if they wanted the sale to go through.

mortgage apparaisals

Yes, absolutely normal and necessary. I think I heard most appraisals these days come in no more than $10k or so above contract price. Beth can shed some light on that (I wish we could tag on here!). Anyways, it will probably be just fine. Don't stress over it at all. A RE isn't going to over price a house, so it shouldn't have a problem appraising.

Re: mortgage apparaisals

Re: mortgage apparaisals

Re: mortgage apparaisals

Sorry about that I didn't mean to make it sound like the Seller had to lower the price of the house. Just that the bank wouldn't finance an amount over what the appraisal came in as.

Re: mortgage apparaisals

Yes, an appraisal always occurs whenever a buyer is getting a mortgage in connection with their purchase. (One advantage of an all cash buyer is no appraisal.)

It's rare for a house not to appraise - but it does sometimes happen.

In that case,

1) the buyer can bring more money to the table;

2) the seller can lower their price;

3) a combination of 1 & 2;

4) the appraisal can be challenged (very difficult to do);

5) the deal can die if buyer doesn't have more cash to kick in and/or seller won't budge on price.

Most of the time, the situation is resolved via option 3. If an appraisal doesn't come in, it usually doesn't fall VERY short. So most of the time, the parties renegotiate and the seller agrees to take a bit less and the buyer will come up with a bit more cash. But there's no set rule... really depends on the circumstance.

Also, as a PP mentioned, the banks typically don't like to have appraisals come in way OVER the contract price, either. I did recently have a sale where I worked for the buyer and the appraisal came in about $20K over the contract price (house was being sold for $375K and appraisal came in at $395K). Sometimes buyers get upset that the appraisal comes in at exactly the contract price, but as Ave said, the appraised value can't always be equated to fair market value. And there is definitely a subjective element to appraisals, even though they use objective criteria.