The three most important prices when buying a home are the list sales price, appraised value, and sales price. While these numbers may be similar in some cases, in others they can vary dramatically. Before making an offer, it is essential to have a clear definition of these figures so that you will be able to make an educated purchasing decision.
Defining List Sales Price, Appraised Value and Sales Price
The list price is the amount of money the home seller wants for his or her property. This figure may be close to the appraised value and ultimate final sales price or may be too high or too low, depending on how accurate the seller is in listing the property. A home seller can price his or her property high for the market, low for the market, or right on the mark.
The sales price is the amount of money you, the home buyer, pay for the home. This number depends on a host of factors including the negotiations between buyer and seller, what size loan you are approved for and how much you can afford to spend, and the condition of the property, and whether the market is a buyers or sellers market.
Finally, there is the appraisal. This is a dollar value for the house that’s determined by an independent third party investigator, know as an appraiser. The appraisal is theoretically the most objective measure of how much the house and property is worth.
Impact of List Sales Price, Appraised Value and Sales Price
The list sales prices impacts your mortgage only in so far as they influence the negotiations between you and the seller. If the seller is firm on his list price and you do not meet it, or don’t come close, then you may be unable to buy the house. However, if the seller is very eager to sell, the list price may simply be a jumping-off point and the seller may be willing to accept any reasonable offer.
The appraisal, on the other hand, can transform negotiations and change the very character of your mortgage. If an independent appraisal suggests that your home is worth less than you’re paying for, or that there are unsafe conditions such as broken zoning permits, or additions built without a permit, your lender may raise your interest rates or refuse to give you the loan at all.
Conversely, if an appraiser determines that the home is a healthy, well maintained, well-zoned property that is worth at least as much, if not more, than you will be paying for it, your lender may approve your mortgage more readily. Although lenders and even sellers often locate an appraiser and arrange for the certified appraisal, you may want to have a house appraised before you consider applying for a mortgage or making an offer. Knowing how much a home is worth in the eyes of an objective party can help you determine how much you want to offer on the house, and can thus shape your final sales price.
Of course, you cannot and should not pay for an appraisal on every home you consider buying. You can achieve a general idea of whether the ratio of list sales price and appraised value are in line by looking at recent listings within the same neighborhood and comparing what those homes sold for to the home you are considering buying. This way, you can ensure the list sales price, appraised value and final selling price are closely aligned.
No comments:
Post a Comment