Low Appraisal Solutions For Home Buyers And Sellers
This Article Is About Low Appraisal Solutions For Home Buyers And Sellers
What Are Low Appraisal Solutions For Home Buyers And Sellers During A Hot Housing Market? Unfortunately, the booming housing market is creating a bidding war on homes listed. There is a major shortage of homes in the market versus homebuyers looking for homes. Despite rates spiking up in recent weeks, there is no shortage of demand for homes versus the inventory. The coronavirus pandemic and states still not reopening fully is not slowing down homebuyers. The coronavirus pandemic actually has forced many employers to create remote job positions. Remote workers can purchase homes in any state they like. They are no longer restrained living within commuting distance to a brick and mortar location. There is a major migration of city dwellers moving to the suburbs or rural areas. You can get a lot more home for the money in the suburbs and/or rural areas. Many homebuyers are looking for a home office and a larger yard. The demand for homes in the suburbs is creating a major demand for homebuyers and not enough inventory. Buying a home over the list price is becoming the norm. In this article, we will discuss and cover low appraisal solutions for home buyers. There is no doubt that it is a seller’s housing market.
The Home Appraisal Process For Homebuyers
A home appraisal is mandatory during the mortgage process. All lenders require a home appraisal during the mortgage process. There are various Low Appraisal Solutions For Home Buyers And Sellers in the event of a low home appraisal.
- There are conventional appraisals and FHA appraisals
- FHA appraisals are slightly more detailed than conventional appraisals
- FHA Appraisals may cost a little more than conventional appraisals
- FHA appraisals really stress on safety and security of the subject property
The value of the home is normally derived by comparing comparable sales nearby the subject property. If the appraiser cannot find any comparable sales similar to the subject property, the home will not appraise. This is often a problem when homebuyers purchase a home that is higher than the list price.
Condition Of The Property
For example, the following will be issued with FHA Home Appraisals:
- loose wiring
- broken glass in windows/doors
- peeling paint
- non-functioning electrical
- plumbing issues
- non-working appliances
- non-working garage doors
Common Issues With An FHA Home Appraisal
If the FHA appraisal notes defective items on the FHA appraisal, it does not mean that the home buyer cannot purchase the property:
- The appraiser needs to come back after the items have been fixed
- The sellers can correct the issue noted by the FHA appraisal
- An appraisal re-inspection needs to be done
- There is normally a cost involved with an appraisal re-inspection
- Appraisal Re-Inspections costs around $100.00
- Conventional appraisals can also have issues
- If there are major maintenance issues with the subject property or the property is not up to standards, the conventional appraiser will note it on the appraisal and the sellers need to correct the issue
- An appraisal re-inspection needs to be done also with conventional home appraisals
- The punch list requested by appraisers are normally minor
- Can easily be corrected by the sellers or sometimes the buyers with the sellers’ permission
- However, a low appraisal can be a problem
- But there are Low Appraisal Solutions For Home Buyers And Sellers
- However, in cases of low home appraisals, there are Low Appraisal Solutions For Home Buyers And Sellers
Most of the time it gets worked out between the buyers and the sellers of the subject property.
Low Appraisal Solutions Is Lowering Sales Price
In cases where the appraisal comes in a few thousand short and the seller is in a hurry to sell and close the deal, the seller normally lowers the sales price to the appraised value of the property. However, sellers will not lower the sales prices on a low appraised home if there are multiple offers on the subject property.
- An addendum to the original contract needs to be completed with the new lowered purchase price and submitted to the mortgage lender
However, if the sellers do not feel that the appraisal is justified and the home buyers still want the house, an appraisal rebuttal can be requested.
Appraisal Rebuttal As Low Appraisal Solutions
Appraisal rebuttals can be requested if the sellers really feel that the low appraisal has no merit and the home buyers still want to purchase the home at the original purchase contract price.
- Appraisal rebuttals are somewhat difficult and normally takes about a week’s time
- The appraisal rebuttal form needs to be completed by the seller’s agent normally
- The seller’s real estate agent should provide five comparable sales to the subject property
- Can make comments on why the low appraisal is not justified
- Request the appraiser should review the supporting comparable sales
- Comparable properties cannot be listed properties that are not closed
- It cannot be properties that are more than a one-mile square area
- Comparable properties should be properties that have closed and recorded in the past six months
- Properties that closed longer than six months can be listed but will have less weight
- If the appraiser sees that the supporting comparable sales on the appraisal rebuttal form is justified, he or she may change the value of the low appraisal
Again, to get the value of the low appraisal changed to a higher value, it is not easy and supporting facts are required.
Other Solutions For Low Appraisal
Most home buyers get a seller’s concession towards a buyers closing costs. HUD allows up to a 6% seller’s concession towards buyers closing costs on FHA loans. Conventional loans allow up to 3% sellers concessions towards buyers closing costs on primary owner occupant homes. In cases of a low appraisal on the subject purchase property, a compromise can be made with the home buyer giving up part or all of the sellers concession towards the buyers closing costs in lieu of lowering the sales price to meet the low appraisal. For example, if a home buyer has a real estate purchase contract on a property for $106,000 with a $6,000 seller’s concession towards a buyers closing cost and got a low appraisal of $100,000, the home buyer can give up the $6,000 closing costs sellers concession. Still, go ahead with the purchase transaction and purchase the property at $100,000. The home buyers will be responsible to cough up the closing costs. If the home buyers do not have enough money for the closing costs, they can request a lender’s credit towards closing costs by the lender in lieu of higher mortgage rate. On the same case scenario, the home buyer can still purchase the subject property at the $106,000 original purchase price. But the lender will base the acquisition cost at $100,000 and base the mortgage loan on the low appraisal value of $100,000. The home buyer needs to come up with the additional $6,000.
Qualifying For Mortgage With Lender With No Lender Overlays
Borrowers with less than perfect credit and higher debt to income ratios who need to qualify for a mortgage with a direct lender with no overlays can contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] Gustan Cho Associates has no overlays on FHA, VA, USDA, and Conventional Loans.