Hello Why 6 Percent,

We are selling a home for $249,500. We agreed to pay $7000 closing costs. The Buyer is putting down $25,000. The appraisal came in $3000 less than sale price. Our Realator said this could be a deal breaker. Since the Lender isn’t lending the full price why would this be an issue?

I could understand if the Lender was lending the total sale price. They wouldn’t want to lend more than house was appraised at. I get that.

Thanks,

Terri F.

Dear Terri,

The fact the appraisal came in $3000 below the selling price of $249,500 can be a problem for the seller, buyer and lender for a number of reasons. 

First, buyer’s usually hesitate to pay more for a property than the appraised amount, but there are other issues, as well.

From what you told me, it sounds as if your buyer is applying for a 90 percent loan. (Selling price $249,500 with $25,000 down).  The fact the appraisal came in at $246,500 means that the lender will only finance $221,850, or 90% of the appraised amount.  This means that your buyer will need to come up with another $2700 at closing to make up the $249,500 sales price.

The reason I am think that the increased cash up front may be a problem for these buyer’s, is that they are financing $7000 in closing costs.  If the upfront cash wasn’t an issue for them, they would have likely written an offer for $242,500.  No doubt, you would have accepted the $242,500 because that is your actual net sales price, after the closing costs are paid from the proceeds of the sale.

In order to keep the sale together, you have a few options to consider.   One, reduce the sales price to the appraisal amount.  Two, ask the agent’s to kick in some of the commission to get the deal to work.  They probably will consider helping.  Three, you or the agent can provide better comp’s to the appraiser and ask for a review of the value.  Or, fourthly, buyer, seller and agents can split the difference to get the deal closed.  A four way split of the $2700 would only cost under $700 for each of you, so that may be a good way to overcome this problem and get on with your life.

Thank you so much for emailing me.  Please follow up and let me know how this goes for you, Terri.  We are here to help.

Thank you for visiting Why6Percent.com.  We have helped thousands of people sell their homes and save money.  We can help you, too.  Call us at 1-800-381-9496.

1. Terri F. says:

   August 24, 2009 at 9:59 am

   Tommi,

   Thanks so much for your for all the info. I wish our realator would have provided some of this but she pretty much sucks! Armed with your advise we ended up getting both the agents to kick in $500 bucks each (anything is better than nothing) and then we reduced the sale price. At this point everything is a go and we should close by Aug 28th.

   Thanks again!