Appraiser Value is less then Sale price? what should I do

[Jaison Emmanuel]

Hello BP members...

I have a flip home that's in the contract for $132K.

The buyer is going thru an FHA loan, and the appraised value came out to $125.

The buyers don't have the 7K to cover the difference, and b/c its some sort of FHA loan.. they pretty much have little Down Payment.

Can anyone suggest any other option for the buyers (and or me) so that this deal can close at 132k?

- Jai

[Chris Mason]

Originally posted by @Jaison Emmanuel:

Hello BP members...

I have a flip home that's in the contract for $132K.

The buyer is going thru an FHA loan, and the appraised value came out to $125.

The buyers don't have the 7K to cover the difference, and b/c its some sort of FHA loan.. they pretty much have little Down Payment.

Can anyone suggest any other option for the buyers (and or me) so that this deal can close at 132k?

- Jai

 Take the offer with the highest down payment that's conventional. 

Let's say someone wants to put 25% down @ $132k as an owner occupant. They will be applying for a 75%*$132= $99,000 loan @ 75% LTV. Suppose their appraisal also comes in at $125k.

$125k * 80% = $100,000. Meaning the lender will lend up to $100,000 @ 80% LTV. Whelp, they only applied to borrow $99k, so this can still go through with ZERO additional down payment required.

LLPA for 75% v 80% for an owner occupant with good credit will be 0.25% delta holding constant the rate... meaning if the buyer pushes back, you can offer a seller credit for 0.25% of the loan amount ($247.50), and the buyer gets the same net interest rate pricing as if it were a 75% LTV loan because you're covering the delta.

I of course cannot predict how the next appraisal will turn out or negotiations. But the above outcome is ONLY possible for someone coming in with 25% down. It'll vary if someone wants to do 20% down or 15% down, but the idea will still apply.