Property Search

What? My Appraisal Came Back Low? Am I Stuck Buying This Home?

Lately, with the change in the market we’ve been noticing a few appraisals having been coming in slightly below the agreed to purchase price. First…. Breathe… there are options and you are protected.

Our team has encountered this issue before and we will encounter it again. If a buyer’s appraisal comes in low there are many options, but here are a few of the main ones:

  1. Negotiate the Purchase Price with the Seller(s)
    1. The sellers are not obligated to alter the purchase price, but you are always allowed to request a change to the price
  2. Manage the Gap
    1. If there is a small gap between the appraisal amount and the agreed to purchase price, you as the buyer may opt to bring the cash to make up that gap to closing
  3. Rescind Your Offer and Request Your Deposit Money Back

Wait… Is Option 3 REALLY An Option If We Did Not Put A Specific Appraisal Clause Within the Offer?

 

In every sense of the word…. YES!!!!

 

We’ve had this argument, on our buyer clients’ behalf with many attorneys lately because a buyer is protected via the Mortgage Contingency which includes the appraisal. When a buyer submits a mortgage application and signs that application there are very specific terms within that application that must be met in order to receive the mortgage.

A Uniform Residential Loan Application is used by all the lenders that our team knows and utilizes. Within this application, which is signed by the buyer there are many terms that are specific to the under agreement property, the buyers purchasing the home and terms of the mortgage. These “details” are what allow a buyer to rescind their offer should an appraisal come in low and a seller opts to not adjust the price.

Many of the lines within these details will change, should the appraisal come in low. As an example, if the purchase price is $400,000 and you are receiving 80% financing ($320,000) you would be paying $80,000 as a down payment. Should an appraisal on this example property come in at $375,000 (and there is not adjustment to price) there would be at least three changes of the detail line items: m. Loan Amount, o. Loan Amount, p. Cash from/to Borrower — As an application, this is deemed to have been satisfactory in your efforts to obtain a mortgage with only ONE application so you can request to have the lender send you a letter of rejection based on your mortgage application.

**Banks will try to be helpful and keep the deal together but you are not obligated to keep the deal together if the terms of the mortgage that you applied for have changed**

 

*** To best protect yourself, when receiving your preapproval from your lender – ask them specifically about the appraisal. Ask the lender if an appraisal comes in low will you be required to come up with extra funds to close on the property or will their mortgage application safeguard you, as their customer, from having to proceed with the purchase if you should choose that option***

Buyers: Top 10 Defects in New Construction

Our good friends at US Inspect provided us with a report on the Top Ten Defects in New Construction, which we wanted to share via blog and also allow you to download for personal use. Many people think, “Oh I have a NEW home that I’m purchasing, I don’t need to do a home inspection!” That, however, could not be further from the truth. There are often many flaws in new construction and they often wait until the last minute to get everything done. It’s important to think of these common defects, plus have your home inspector look for anything and everything else:

  1. No insulation installed in the attic
  2. Missing proper roof vents, or vent holes cut, but roofed over
  3. Windows installed improperly
  4. Hot and cold water reversed at faucets, tubs, and showers
  5. Other plumbing issues
  6. Inoperable or missing GFCIs in required areas
  7. Heat vents missing, not connected
  8. Cut trusses in roof or floor trusses
  9. Tempered glass missing in required areas
  10. Improperly installed roofing, flashing, or roof jacks

Click on the picture below to download a more detailed description of issues pertaining to these Top 10 Defects. If you’re buying a new construction property, give us a call at The Madden Team to help!

Why Buying a Home Is Like Running the BAA Half Marathon

First off, let me say this, neither John or Mark ran the BAA Half Marathon yesterday which started and ended at the Franklin Park Zoo. Mark did go to cheer on the runners and came away, after hearing a few of the runners discuss the course, the running that race is a lot like buying a house especially your first home! There are many different race lengths and they all apply to this article, but in particular the race Mark watched yesterday seemed to very much so be like buying a home.. lets see why! [Read more...]

NAHB’s Study of Life Expectancy of Home Components

As real estate agents, we are always asked the questions – “How long does a water heater last?” or “When will I need to replace this roof?” Of course, we are not experts in this field which is why we trust home inspectors to let our clients know the approximate age of the household items which will be part of their real estate purchase.

In the summer of 2006, the National Association of Homebuilders started a study to determine the approximate life expectancy of the majority of household items. In this study they interviewed manufacturers, trade associations and researchers to come up with the data. As they note on page 1 of the full report: [Read more...]