Let's say you are buying a Canton Michigan home.  You got the seller to reduce their price $10,000 .  You have a purchase agreement signed for $265,000 for a 2000 square foot colonial.  So you go to your mortgage loan officer and start filling out the paperwork.  The mortgage lender submits the loan to the lender.  Of course the lender wants an appraisal.

The mortgage loan officer gets an appraisal done.  But the appraisal on the Canton home comes back at $225,000.  What does that mean to you?  IT MEANS THE CANTON HOME IS ONLY WORTH $225,000.  Don't listen to your real estate agent and try to get better comps.  The house is really worth $225,000.

So if you are getting a 80% loan the bank is only going to loan you 80% of $225,000.  Which is $180,000.  So you have two options.

1. Go back to the seller and ask for a price reduction to $225,000
2. Or pay too much for the Canton home at $265,000.  Of course if you do that the bank is going to loan you the $180,000.  Which means you will have to bring $85,000 to the table as a down payment.  Do you have the extra money?  Do you love the house that much to over pay for it?  Are you willing to overpay and not be able to sell it in the short term because you owe too much.

An appraisal is done by a licensed Michigan appraiser that is only giving his opinion of what a home is worth.  They are supposed to be impartial and to give a fair opinion of what the Canton home is worth.  So if your appraisal comes in much lower than the purchase price do number one.  If the seller doesn't lower the price then let the house go.   That is just my opinion of what to do. 

What you chose to do is entirely your decision.

Russ Ravary

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