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Thursday, October 13, 2016

What is my home worth?

Appraisers & Homeowners Don’t See Eye-To-Eye on Values. At times the two sides are closer in how they value a home, but given many external variables - including lender pressure and insurance considerations - the gap widens. Working with a real estate professional and following a good market analysis can reduce the chances of a huge variance on how much a home is valued at. Why is that important? Well, the most obvious is how much you will get for the sale of your home. On the buyers side, it is how much will be paid for the home. If the sale transaction was for all cash and the buyer and seller both agree on price - then a deal can go forward. When there is financing involved the lender is going to be loaning money secured by the property value.

Suppose a lender is asked to approve a loan on a house with a sales price of $100,000. The buyer has $10,000 and the lender is in for the remainder ($90,000). If the lender were making loans at this ratio, the lender is taking on the risk and counting on the value of the home being $100,000 in case of default. That means the lender would have $10,000 to work with to cover the cost of reselling the home and repossession expenses. Now suppose the homes market value is only $95,000. If the lender had loaned $90,000 and could only expect to resell the home for $95,000, the amount left to work with on a default is considerably less. Appraisers are cautious to protect the lender's interest and face a tremendous challenge as market prices shift either way. Read more