We know that in the current market homes are getting snapped up within days of hitting the market, receiving multiple offers and often seeing bids much higher than the asking price.
This led UrbanTurf to wonder: What happens when the final sales price is higher than the appraised value of the house? How does that impact a buyer’s overall outlay?
William Slosberg of First Savings Mortgage Corp. offered some insight.
Since lenders lend based on either the sales price or the appraised value, whichever is lower, Slosberg tells us that a buyer who wins a home by bidding up the price to well above what is being asked should be prepared to make up the difference outside of the loan.
“If the borrower was applying for an 80 percent loan, the lender would lend him 80 percent of the appraised value and the borrower would have to come up with all of the rest of the money themselves,” he said.
Of course, many buyers would just walk away from a deal in which the appraised value comes in lower than the price they offered, but there are always those that love a place so much that they would be willing to throw in the extra cash regardless.
This article originally published at http://dc.urbanturf.com/articles/blog/tight_housing_market_means_more_cash_from_buyers/5517
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