The housing mess may finally be behind us. Maybe. Various economic reports recently show that housing prices in several markets appear to be on the rebound. But that's not the case everywhere. And if you're an active real estate investor that's been scooping up below-market property you can attest that, at least in your market, properties are still soft and getting a bit softer. You're in a declining market.
Lenders pay attention to the term "declining value" as it relates to a property appraisal. When a lender orders an appraisal it looks to place a loan to a borrower based upon the lower of the sales price or appraised value. If the buyer has a contract on a home for $100,000 and the appraisal comes back at $95,000, the lender will base the loan off of the $95,000 value and not the price shown on the sales contract. There is a specific area on the appraisal where the appraiser notes whether or not the property is located in a market with increasing, stable or declining value. If the box "declining" is checked, there's more homework to be done. ทาวน์เฮ้าส์มือสอง
More homework means the appraiser should find additional, recent sales in the area to help justify the sales price. The appraiser may also be asked to provide written notes in the file explaining why he or she determined the market to be declining. Additional research can be done to show that recent sales were sold under duress, temporarily suppressing values. Or, the lender may also ask for an additional amount form the borrower for a down payment when a market is deemed as "declining."
When a property is located in an area that the appraiser identified as declining in value, the lender as well as the borrower should take pause. If you're flipping a property, maybe it's not the best time to buy unless you're convinced you've got a special deal. If you're holding for the long term, declining market values will have little impact.
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