What if my appraisal comes in higher than what I’m paying?

Posted by BJ Matson on Wednesday, July 24th, 2013 at 2:21pm.

This is a common question I get from my clients.  It is rare when we write a contract at a given Sales Price, that the appraised value will come in exactly at that amount.

Say we ratify a contract between buyer and seller for $168,500 on a silver spring condo.
Appraisal comes in at $175,000.

Does this mean the buyer can come up with less of a down payment?
No.  The Lender still bases it’s approval on the sales price OR appraisal, whichever is lower.  If the buyer is putting 10% down on this given approval, the Lender will want 10% from the Buyer and not from the perceived equity based on this higher appraisal.

What if the reverse were to happen.. and the appraisal comes in at $165,000?
The Lender in this scenario will want 10% down payment based on $165,000.  The Buyer can come up with the $3,500 difference on top of this 10% down payment, OR the Seller can lower the sales price…  or a combination of the two.

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Appraisals are not an exact science.  It is extremely important to use a local lender who will use a local Appraisal Management company.  Someone who knows the market well.  I had a recent purchase where my Buyer was initially using Bank of America, and his Loan Officer was based in Michigan.  This loan officer ordered through BofA’s national appraisal mgt co.  They sent an appraiser who came in $40,000 below our sales price.  One of his comparables was still on the market..!  and was a short sale..!  To use this garbage comp, instead of one of the many sold comps that justified value… was just asinine.

Buyer (and Seller) wanted a new appraisal.  To do so in today’s lending world, you have to choose a new lender.  The new loan officer was based in Montgomery County.  This new appraisal came in slightly above sales price.

At your service,
BJ Matson
Realtor, Remax Town Center
301-257-1270

BJ MatsonRealtor®
Home Buying Advisor • RE/MAX
301-881-8900 text-call
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