USDA Appraisal Question

[newmomnewme]

Is there a certain rule for appraisals? If the house doesn't appraise for the amount of the offer what happens??

[DanTheMan77]

USDA will finance up to 100% of market value, so there are a couple of options. You can try to renegotiate the sales price with the seller and get a lower price (presumably what it appraised for), or you can pay the difference in cash at closing. Your contract is most likely contingent on financing, so if that's the case and neither of those options work out, the contract gets cancelled.

[newmomnewme]

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@DanTheMan77 wrote:

USDA will finance up to 100% of market value, so there are a couple of options. You can try to renegotiate the sales price with the seller and get a lower price (presumably what it appraised for), or you can pay the difference in cash at closing. Your contract is most likely contingent on financing, so if that's the case and neither of those options work out, the contract gets cancelled.

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Thank you so much Dan. Here is the scenario...its new construction; comps in the area are 185k-195k. The builder's price is 217k. I meet with them next week and I am willing to pay no more than 200k.  I just wanted to know what USDA regulations were.

[DanTheMan77]

I wouldn't worry about it. It's hard to believe that the appraisal would come in below the contract price on new construction, unless you are grossly overpaying. Are there any other sales in the development? Not sure about your area, but where I am the recorded new construction prices often don't include "extras". For example, a newly constructed home with a base price of $185,000 and $15,000 of extras sells for $200,000 but the deed reflects as sale price of only $185,000. If that's the case in your area too, any half decent appraiser should know how to handle that. 

[newmomnewme]

This is my first time purchasing a home....and I really want to live in this community, in this model....lol

To answer your question, yes there are other homes (sales) in the community and most of them are around185k-195k...all under 200k there are a few larger homes at 250k or so that were sold last year. Not sure if it makes a difference, they started building 2012....  

The model and lot that I want is listed at 217k and I am willing to pay 200k for it....honestly I would be happier paying closer to 185k since that is what the houses are going for around the area. So, how do I work this? I am pre-approved for 235k, but I can comfortably afford 200k. Do I offer 200k or 185k?

[DanTheMan77]

Ultimately only you can answer that question. Are you working with a buyer's agent? If so, they should be able to help you out. If not, I recommend you start working with one and ask them that question.

[newmomnewme]

I am working with the builders agent and financer...I will make my offer next week (as soon as the weather breaks)  Thanks again!