Strategies In Buying Home With Low Appraisal
Home values have gone up since the 2008 real estate and credit meltdown and the real estate market is strong and does not seem like it will relapse. Home sales are strong everywhere in the United States. Many areas like Southern Florida and many areas in California, the housing market is so hot that many times homes are selling above the listing price and there are more home buyers than there is inventory. Southern Florida home sellers are not offering sellers concessions because the housing market is so strong. First time home buyers are being squeezed out by home buyers who are offering cash for homes with no mortgage contingencies and buying homes as is.
Homes that are priced under $200,000 are considered hot properties. In South Florida, any property under $150,000 is being snatched up by real estate investors. Many first time home buyers do not have a chance on lower priced homes. Many first time South Florida home buyers look for properties priced between $100,000 to $150,000. Many real estate agents who represent first time home buyers looking for homes under $150,000 are afraid of offering lower than asking prices and some realtors do not even request sellers concessions which is common everywhere. Sellers concessions from the sellers is beneficial for home buyers who have limited funds in covering closing costs.
When there are more home buyers than housing inventory, there will be bidding wars on homes. Buying home with low appraisal is very common when a home buyer offers more than the listing price on a home. Home buyers offering offers above the list price of a home needs to be prepared that the home may not appraise out and be ready for the consequences. There is nothing wrong with buying home with low appraisal but the mortgage lender will go off the appraised value of the home and not the actual home purchase price. Home sellers who accept offers higher than the list price may want to remove the appraisal contingency and may want to further research the home buyer whether they can qualify to cough up the extra funds on top of the appraised value. Most home sellers prefer cash offers with no appraisal contingencies.
Basics In Buying Home With Low Appraisal
Generally, most home buyers have an appraisal contingency stating where if the home does not appraise out that they can cancel the real estate purchase contract and the seller needs to refund the earnest money. Most home sellers price their homes the right price so they have no issue with the home not appraising out. However, during a hot real estate market, there are situations where a home buyer really wants a particular home but has several other home buyers that want the same home. Competing with cash home buyers with no appraisal contingencies will be the biggest competition. However, many cash home buyers want deals. Many home buyers prefer to sell to cash home buyers at a slightly lower price than a home buyer who needs a mortgage loan.
Winning The Bid On Buying Home With Low Appraisal
There are home buyers who fall in love with a home and want that home no matter what the price including paying the home above the appraised value of the property. Mortgage lenders will allow that, however, these home buyers will have to come up with the amount that is above the appraised value. For example, if a home buyer offered a home for $120,000 but the home appraised at $100,000, the mortgage lender will go off the $100,000 appraised value. If this home buyer is approved for a FHA Loan, then the mortgage lender will require 3.5% down payment on the $100,000 and will give the mortgage loan of 96.5% of the $100,000 or $96,500. The home buyer needs to come up with the $3,500 plus the $20,000 that is above the $100,000 for a total of $23,500 down payment plus closing costs.