USDA Mortgage/Appraisal question

[Anonymous]

Hello all! Thanks in advance for any advice given!!

I have been countering on a house. My biggest concern is the appraisal. I have asked for a percentage in concession for closing costs. They are def asking too much for the house but their first counter was for the asking price with the % concession, which is still more than I, and my realtor, thinks it will appraise for. So I am countering again.  My confusion lies here...

Does the appraisal have to match the offer (purchase price) minus the concession % for closing costs or including? I am confused on how it works. If I have the closing cost concession, the mortgage amount should be for the purchase price minus the concession, correct?

I have not been able to have anyone thus far explain it to me so I understand.

[StartingOver10]

The appraisal has to match the purchase price. The sellers concession is included in the purchase price. You can offer to pay more than the appraised value - but why would you? Appraised value is supposed to reflect the market value at that point in time.

The amount you finance is the loan to value (LTV) as a percent of the appraised value or the contract price, whichever is lower. The sellers concession does not affect the LTV at all.

[Anonymous]

Of course I wouldn't pay more than the appraised value.

100% appraised value can be financed and cannot be higher than the purchase price. I understand all of that.

If the seller pays closing costs, and their proceeds are lower because of that, I don't have to pay or finance some/all of the closing costs.  So  could I offer an amount above the current market value to include the closing costs knowing they are paying them?

For example, a house shows a current market value of $100,000. They agree to a 6% concession. Can the contract be $106,000,? Or does it need to stay at or below $100,000 regardless of concessions on closing costs?

[StartingOver10]

It needs to stay at $100k.

If you offer $106k you are paying more than market value.

Their proceeds is not your issue. If you lose the bid to another buyer because of the seller concession then that is a function of the market. The seller is not obligated to pay your closing costs - but in this type of market, most sellers contribute something.

[Anonymous]

Thank you for the advice StartingOver10.