Sales price is $687,000. Buyer’s appraisal comes in low at $611,000 as he gets low-balled.
Naïve buyer had waived the (subject to) appraisal on the residential purchase agreement in order to get his bid accepted from the multiple number of bidders. He really wants this home.
Buyer planned on putting just 15 percent down based upon the $687,000 sales price. Now, he would have to come up with 15 percent down of $611,000 (lower of sales price or appraised value) plus the difference between the $611,000 and the $687,000 for a total of $167,650.
Buyer only had $103,050 (15% of $687,000) plus some funds for settlement costs and reserves. He’s in jeopardy of losing his deposit.
Solution: We take the loan to a different wholesale lender and we get a much more fair appraisal of $669,000. Buyer puts down 10 percent of the $669,000 appraisal (plus the difference between the new appraisal and the agreed upon sales price of $687,000 or $84,900).
We arrange an 80/10/10 to avoid mortgage insurance.
Buyer gets his home and protects himself from losing his earnest money deposit.
All is good in the world!