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What price does $200K home need to appraise at if I get an FHA loan with 6% seller's concession?

Assuming 3.5% downpayment.
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July 11 2009 - Birmingham
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Answers (17)

If I understand your question below then the following is the answer as it appears you want to get your rate as low as possible via using the max seller concession allowed.

$212766 should be the selling price- Once the seller gives you the 6%- i.e. = $212,766 * 6% seller concession = $12766.  The seller then nets $212,766 - $12,766 = $200,000.  You can then use the $12,766 in concessions to get yourself a sub 5.00% rate.  PS- You still need to come to the table with the 3.5% of $212,766- in this case- $7,446.81.
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July 13 2009
Jim  (the real estate agent),

I think WWW.HUD.GOV would be a lot more helpful.
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July 11 2009
Trick question right? Like who's buried in Grant's tomb?
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July 11 2009
Profile picture for Ken Kopper
Jim, those guidelines are old...Minimum downpayment is 3.5% and MI is .55 when LTV >95.00%.

JSmith78, your realtor should be assisting you in structuring an offer that works in your best interest while not offending the seller's with an extremely low and unreasonable offer. If you dont feel your realtor is giving you that assistance, DUMP THAT ZERO AND FIND A HERO!
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July 11 2009
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Thanks again everyone, home is listed for $225K and believe it's over priced, so am trying to structure the offer at a fair value plus seller's concession.
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July 11 2009
I am not a mortgage expert, I leave that to mortgage professionals. But, I did a search on fha loans and this site might be helpful to you: http://www.fha.com/fixed_rate.cfm  Check the section under "Nuts & Bolts" for the 203 (b) loan.
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July 11 2009
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Good Luck with the purchase JSmith78...as Bob alluded to..be cautious of your realtor or LO offering the services of their preferred appraiser to get you "that value"..You are risking not only buying a over valued property but also the fact that an "appraisal stepped on until it draws blood" will be torn apart by the lender and they could request you pay for another one from their preferred lender.
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July 11 2009
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Thanks everyone - I do not have a contract, and am trying to structure an offer.
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July 11 2009
It they want the 12k on top of the list price, that would increase the sales price to 212k and it would have to appraise for 212k.  I doubt a house listed for 200k is worth for 212k.

I am sure there are some appraisers that still "bring" in the values, so be careful. 
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July 11 2009
I agree with those last 2 great lenders. Do you already have a contract for $200K with the seller paying 6% concession or are you trying to figure out how to structure your offer? If a home is for sale for $200K and no closing cost concession, then you should decide what this house is worth to you if you had cash so lets say you would offer 196K and they would take it. At that point then add back the seller concession of 6% or $11,760 for a sales price of $207,760. Like they pointed out, it must appraise for the sales price or pay the difference.  
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July 11 2009
Then the sales price is $212,000 with a $12,000 concession.  The house would need to appraise for $212,000 which begs the question, is the house worth that much.  There is another thread dealing with that exact problem.
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July 11 2009
Profile picture for Ken Kopper
Increasing the offer to entice the seller's to assist with full 6% (by the way, most typical purchases are 3-4% unless taxes are enormous for the area) would only be an avaialable option if the home were being sold under true market value and seller was looking for quick sale..

For instance seller is listing for $200k but you and your realtor are looking at comps and it appears home would appraise for $215k.

If seller is not willing to sell for $200k and take an aditional $12k hit to their bottom line profit...Then you could reasonably counter with $212k with 6%..If the house doesnt appraise for at least $212k, that deal won't work.
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July 11 2009
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To clarify as I'm still a bit confused:  selling price = $200,000, plus 6% concession, making it $212,000 .... would it then need to appraise at $212,000 or the $200,000?
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July 11 2009
The 6% concession is not added to anything, it is deducted from the sellers profit and is based on the purchase price.  
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July 11 2009
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So is the 6% seller's concession, which I assume is added to the amount financed, irrelevant to the appraisal amount?
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July 11 2009
Profile picture for Ken Kopper
The property would not need to appraise for any amount other than the market value of the property as determined by a FHA licensed and approved appraisal.

From the lender's view point, Loan to Value for a purchase is determined by using the lower of the appraised value or purchase price.

Using the $200k purchase price as an example,

If the home appraises for $210k, the loan amount will be 96.5% of 200k

If the home appraises for $190k, the loan amount will be 96.5% of 190k in which case you would need to either renogotiate the purchase down to $190k or bring an additional $10k to close to make up the difference or walk away from the deal.
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July 11 2009
It just needs to appraise for the $200,000.
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July 11 2009
 
Related Questions
What price does $200K home need to appraise at if I get an FHA loan with 6% seller's concession?
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Latest answer by Liberty Mortgage
July 13 2009 | 17 answers
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