With national home prices on the decline, some homebuyers are seeing appraisals come in lower than their purchase price, and that’s leaving many scrambling to come up with ways to close the gap.
Jim Tourloukis, president of Verico Advent Mortgage Services, knows at least one of them. A client came to him after buying a home through another broker in February for $1.02 million. The original broker didn’t do the appraisal quickly, and the close is set for mid-July. Their recent appraisal came back at just $830,000.
“They’re short $190,000,” Tourloukis said. “Now they’re having a challenge. They can’t close. We’re going to the Bank of Mom and Dad to make up the difference because the bank will only lend up to 80%.”
In a recent CMT post, mortgage broker Ross Taylor outlined the issue that arises when an appraisal comes back lower than the purchase offer.
“Suppose you agree to buy firm for $1,100,000. You are willing to put up 20%, or $220,000. But, the property appraises at only $1,000,000,” Taylor wrote.
“Your lender will offer you a mortgage of $800,000, which is 80% of the appraised value. You will have to come up with $300,000 to fulfill the purchase price of $1.1 million,” or $80,000 more than the approved mortgage amount.