Your Destin Florida Condo Under Appraised? Now What?
I recently had a Destin Florida condo listing “under appraise”. What does that mean? The buyer applied for a mortgage, and his mortgage lender ordered an appraisal. The appraised value was less than the purchase price. Oh no.
An appraisal is an opinion of value using comparable properties making adjustments for differences such as square footage, year built and amenities. The mortgage lender requires an opinion of value to ensure that the loan to the buyer is for fair market value. If the appraisal is less than the purchase price, the lender may not issue the loan, or the buyer may pay the difference in cash between the appraised value and the purchase price, in some cases. Either way, when a property under appraises, the buyer typically does not have to complete the purchase. Often when there is an under appraisal, the buyer will ask the seller to reduce his purchase price to meet the appraised value. The seller does not have an obligation to do so, but does in many instances.
Why would a seller reduce the agreed-upon contract price to meet an appraised value? Maybe the seller realizes the property sold a little high, and he would have a tough time re-selling to someone else for the same amount. The home might be a couple of weeks away from closing. If the seller rejected the new, lower price, he would have to try to market the property to another buyer and wait for a new mortgage approval process. That could take months. It would be a risk. To the seller, getting a little less money now may be worth more to him than getting possibly more money at some later date (time value of money). The next lender may also under appraise the property. With some loans, like VA (Veterans Administration), the notice of value can remain with the property, not the buyer, but the property, for six months! This is important in markets where a lot of buyers use VA mortgages, like in Fort Walton Beach.
So how did we resolve this contract issue for this Destin Florida condo? The seller reduced the price, but removed the closing cost credit to the buyer. The contract type was changed to “as is”, versus having the seller do any repairs. This way, the price adjustment was made more palatable to the seller, who understood his Destin condo probably sold a little high in the first place.
Do you have questions about your Destin Florida condo or home appraisal? Give me a call!
It’s Wendy… It’s Sold!
Wendy Rulnick, Broker, Rulnick Realty, Inc.
Call 850-650-7883 ext 204
Email Wendy: [email protected]
Wendy Rulnick, Broker, has been featured in “Kiplinger Personal Finance Magazine” and “Florida Realtor Magazine”. Wendy Rulnick sells real estate in Destin, Santa Rosa Beach, Miramar Beach, Seagrove Beach, Watercolor, Sandestin, Seaside, Crestview, Rosemary Beach, Mary Esther, Shalimar, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Panama City Beach.