Appraised valve vs purchase price

[dplummer]

If a property apprasies for more $$ then the purchase price ,why will the bank only use the purchase price for loan calculating? Yet if you were to re finance at some point the bank would then use the apprasied value for calculating the loan amount. I hope my question is clear & I apoligise in advance if not.

Doug

 

[bizaro86]

QUOTE (dplummer @ Dec 2 2010, 03:48 PM) If a property apprasies for more $$ then the purchase price ,why will the bank only use the purchase price for loan calculating? Yet if you were to re finance at some point the bank would then use the apprasied value for calculating the loan amount. I hope my question is clear & I apoligise in advance if not.

Doug

I think its a case of, "he who has the gold makes the rules." You might be able to find a private lender willing to lend based on an appraisal (check the classifieds on this site...) but I suspect you`d pay a higher interest rate. Then you could refinance conventionally a year or so later based on the then-current appraisal.

Regards,

Michael

 

[WadeFenner]

QUOTE (dplummer @ Dec 2 2010, 03:48 PM) If a property apprasies for more $$ then the purchase price ,why will the bank only use the purchase price for loan calculating? Yet if you were to re finance at some point the bank would then use the apprasied value for calculating the loan amount. I hope my question is clear & I apoligise in advance if not.

Doug



In a nutshell -

• Banks are conservative by nature and would rather go with the lower of the two values any chance they can.
  
  They also use sale prices of an indication of value trends ie If the seller was prepared to sell at a lower price values must be going down or why else would they sell at a price lower than the appraisal. Twisted yes.
  

Banks dont really understand the concept of "Getting a good deal". If a seller is selling low values must be low.

Doesn`t really make sense from our position I know. You might consider buying the property on a line of credit or similiar, then doing a little work on it to help support the higher value, then refinance the property a few months down the road. Having some proof or documents related to the sellers current position or reason for selling below the market value might help support your claim that they sold at a low price because they were motivated by circumstance etc.

 

[Thomas Beyer]

QUOTE (dplummer @ Dec 2 2010, 03:48 PM) If a property apprasies for more $$ then the purchase price ,why will the bank only use the purchase price for loan calculating? ..
Because that is the LAW of the land .. both written and unwritten !

Thus: play within the LAWS of the land .. to your advantage !

Buy with 80% mortgage, 1 year open .. then do some more modest upgrades .. and get another likely higher appraisal in 5-8 months .. then re-finance .. and you may have cash in your jeans AND a cash-flowing asset !!

Repeat .. for continued succe$$ !!

Be careful to not overlever though as the rent minus vacancies minus all operating expenses still has to cover the debt payments !!

 

[dplummer]

Once again, Thank You! for all your help.

Doug

 

[Mike Milovick]

QUOTE (dplummer @ Dec 2 2010, 05:48 PM) If a property apprasies for more $$ then the purchase price ,why will the bank only use the purchase price for loan calculating? Yet if you were to re finance at some point the bank would then use the apprasied value for calculating the loan amount. I hope my question is clear & I apoligise in advance if not.

Doug

Hi Doug;

If you can pull it off, buy the property cash or perhaps a private lender can lend you some $$$$ short term (perhaps on interest only basis?).

Once property closes, take appraisal to another bank and seek loan to value based on appraised value - not financing based on context of sale and purchase.

Mike

 

[Thomas Beyer]

QUOTE (MikeMilovick @ Dec 4 2010, 09:19 AM) .. buy the property cash ..
but not with a copyrighted real estate form !

 

[housingrental]

Hi Thomas
You have a big smile on your face after typing half your posts dont you?
QUOTE (ThomasBeyer @ Dec 4 2010, 11:48 AM) but not with a copyrighted real estate form !

 

[Thomas Beyer]

QUOTE (housingrental @ Dec 4 2010, 02:05 PM) Hi Thomas
You have a big smile on your face after typing half your posts dont you?
often ..

it is therapeutic (to me mainly .. but also to others sometimes) .. and hopefully helpful for others too !

 

[housingrental]

Very good
The world needs more of this
QUOTE (ThomasBeyer @ Dec 4 2010, 05:19 PM) often ..

it is therapeutic (to me mainly .. but also to others sometimes) .. and hopefully helpful for others too !

 

[jtaikman]

When purchasing a home banks will tend to take the lower of the two values. This is due primarily to the banks always looking at the worst case scenerio. The banks are essentially investing in you and your ability to repay their loan. If you think about it, if you were loaning someone hundreds of thousands of dollars of your money, you would probably be looking more at worst case scenerio then at best case scenerio.

Any further questions, shoot me an e-mail.

Jeff Aikman
[email protected]

www.jeffreyaikman.ca

Visit me on the web!!