Monday, August 14, 2006

What do you mean it didn't appraise?

From RealtyTimes:

Housing Counsel: Appraisals 101

You plan to purchase a condominium unit, and enter into a contract with your seller to pay $500,000. You give the agent $10,000 as the "good faith deposit," to be held in escrow until settlement takes place.
...
You plan to obtain a 90 percent loan ($450,000) and put down the difference of $50,000 (plus closing costs) in cash. Your lender has advised you that you will qualify for such a mortgage loan, but that the availability of the loan is contingent upon a satisfactory appraisal.

You ask your real estate agent whether you should include a contingency for financing in the sales contract. The agent tells you that other units in the area -- and indeed in the same complex -- have sold for $500,000 or above, and that there should be no problem with the appraisal.

In reliance on these statements, and because you really want the unit, you do not include a financing contingency.

Your lender obtains an appraisal, and it comes in at only $460,000. What rights do you have?

Since you opted not to include the contingency for obtaining a mortgage, you may be stuck. Your lender will still lend you 90 percent -- but it will be based on the appraised value, not the contract price.

This means that although you may have to pay the full $500,000 for the unit, you will only get a loan of $414,000 and instead of paying $50,000 in cash for the difference, now you have to cough up $86,000 -- whether you have this kind of money or not.

18 Comments:

Anonymous gary said...

But...but....I thought Suzanne researched it?

8/14/2006 07:11:00 PM  
Anonymous Anonymous said...

...or yoiu walk away from your 50 grand.

8/14/2006 08:03:00 PM  
Anonymous Anonymous said...

{{{This means that although you may have to pay the full $500,000 for the unit, you will only get a loan of $414,000 and instead of paying $50,000 in cash for the difference, now you have to cough up $86,000 -- whether you have this kind of money or not.}}

Don't you think that this happens in all 5 boros of NYC, & in many parts of Hudson County (where condos are SHOCKINGLY overpriced)??

Or doesn't this apply to real estate in this metro area because of the fact that "Everyone wants to live here" and the sky is the limit in terms of rents & housing prices.

I never could understand how the average one bedroom condo in Jersey City or Hoboken could sell for over $500,000 with additional fees for HOA expenses & RE Taxes. You only need about $100,000 in Cash for Downpayment plus another $25,000 for closing costs for your average "Huge & Loftlike" 700 square foot condo with an average price of $500,000.

Not to mention the tiniest, crappiest one bedroom co-ops (not condos) that sell for at least $750,000 in Chelsea, Tribeca, or the West Village (which are nothing but overpriced & way overtrendy with too much B & T on weekends).

Who are the appraisers?? Friends of the Corcoran group or Citihabitats??

And instead of not buying, mommy and daddy come to the resue and put any amount of money in order for their 20 something kid to get the apartment since no one with any real intelligence who needs to work for a living would buy into the current BS going on with this regions housing market

8/14/2006 10:13:00 PM  
Anonymous Anonymous said...

yee all,

Just got back from Sturgis, SD for the motorcycle ralley.
You always can learn some good economics from that thing.

Tell yall about it soon.

SAS

8/14/2006 10:16:00 PM  
Anonymous Anonymous said...

OT
www.nj.com
"Web site unveiled for property tax reform effort"

The Web site can be found at http://www.njleg.state.nj.us/PropertyTaxSession/specialsessionpt.asp

No longer a resident of New Jersey (I simply pay payroll taxes and SUI to NJ), I can't give them any suggestions.

Maybe someone else here can.

Pat

8/14/2006 10:21:00 PM  
Anonymous Anonymous said...

Putting aside all of the Bullshit,

any time you buy a property you should have a real estate attorney and they should tell you to include a "weasel clause" This happened to a family member of mine. The contract price was higher than the lender's apprasial he eventually paid the appraised value.

8/14/2006 10:27:00 PM  
Blogger RichInNorthNJ said...

Pat,

Can you run that link through TinyURL.com?

Thanks, Rich

8/14/2006 10:30:00 PM  
Blogger RichInNorthNJ said...

OT:

Due to the slow down and competition, it seems they just can't seem to stop themselves.

WaMu, Wells Fargo take on more housing credit risk

"Amid concerns about the housing market and consumers, Washington Mutual and Wells Fargo on Monday said they remain confident enough about credit quality to boost their offerings of riskier loans such as subprime mortgages and home equity loans or to seek new credit card business."

I'm curious to see how the Wall Street will view this news from WM and WFC tomorrow.

8/14/2006 10:38:00 PM  
Anonymous UnRealtor said...

Rich, just triple-click the link to select the whole line.

8/14/2006 11:24:00 PM  
Anonymous Anonymous said...

Property Tax Reform
http://tinyurl.com/qwhrt

Click on each subtopic link on the page to go to that budget topic.

Each topic contains a link to the responsible committee members e-mail as well as a link to the comment by topic page.

8/15/2006 06:31:00 AM  
Anonymous Anonymous said...

From Danielle DiMartino. “Many apologists for the housing industry remain insistent that because house prices have never fallen on a national level, they never will. Actually, they already have. Since the fourth quarter, median home prices have fallen about 1 percent, according to data Goldman Sachs mined from the National Association of Realtors.”

“The numbers are even worse for condos. The median price of a condo nationwide has been falling at a 9 percent annual rate since the fourth quarter of 2005, according to Goldman Sachs.”

“The average mortgage loan size is declining on an annual basis for the first time since 2001. And over the last year, the housing vacancy rate has risen at its fastest pace since data collection began in 1956. ‘Since excess supply is perhaps the most ‘leading’ indicator of market weakness, we would strongly caution against the assumption that the housing downturn is already entering the end game,’ Goldman added.”

8/15/2006 07:21:00 AM  
Anonymous Anonymous said...

Another REALTOR MYTH kabooshed.

Prices on a notional basis are falling and it's only wav 1 of the Tsunami that hit. Now we have to wait for wave 2, 3 and 4 to see the massive fallout.
You have seen nottttt"""ING yet.

Housing Babababa BUST!

Bob

8/15/2006 07:30:00 AM  
Anonymous Anonymous said...

check out what David Lereah said

http://www.canjura.com/publico/Time%20article-800.jpg

8/15/2006 08:23:00 AM  
Anonymous Anonymous said...

sorry for the long link on the above, this one is better:

http://tinyurl.com/q297n

8/15/2006 08:26:00 AM  
Anonymous Anonymous said...

Just get one of those crooked appraisers to goose up the appraisal.

8/15/2006 09:17:00 AM  
Blogger chicagofinance said...

broken record....

http://www.njrereport.com/forum/viewtopic.php?t=116

8/15/2006 09:17:00 AM  
Blogger Mr. Oliver said...

SAS, did you see the Black Crowes or Drive By Truckers? Two of my favorite bands, they never disappoint.

The Crowes are hitting on all cylinders these days fo sho.

8/15/2006 09:07:00 PM  
Anonymous Anonymous said...

all,

I will post my Sturgis experience tomorrow. Just wrote a blog earlier, now I am tired. Check my post under the "demographic shift".

Man, I am tired, think its time for my warm milk & cognac (my nightly ritual)

SAS

8/16/2006 12:06:00 AM  

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