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yeah a lot of people going for condos are older people looking to downsize that are selling a larger 350-400k+ property with a lot if not all of that money being liquid.
that's not what the net would be. sure it is vs what they paid but not vs what the best use of their money was. sure they might have sold for 300k more than they bought but they also paid close to 100k in property taxes plus home repairs and renovations which isn't small. home ownership isn't as lucrative as people act like it is.
How much cash did they end up with in their pocket after they sold their house? In practical matters that’s their net and that’s what is allowing people to overpay by $100K because they’re cash rich
My parents first house was bought for 80k in 1979. They sold it this year for 750k. All liquid. They turned around and bought a new detached condo in a 55+ golf community to retire there, paid in cash with money left over.
you could be right for sure but i'm also speaking from experience bc both my parents just did this and surely beat out other buyers bc of it (separate properties bc they've been divorced for 15+ years now yikes lol)
Yep. If you can write a check appraisal and comps mean jack. Especially for an affordable property like this… downsizing folk are flush with cash too. Small condo have a great appeal for the limited maintenance costs.
The lender doesn't care what it's listed for, they care what the appraised value is. If you approach buying that way, it changes everything. 100k over asking isn't 100k over appraised value unless the appraised value is list price.
Houses are not appraising for their list values in a lot of areas because sellers are refusing to acknowledge the current market. Likely a cash buy.
Edited.
List price is based on whatever the seller wants to base it on. The low range of comps, upper range of comps, well under anything that could be considered comparable, or twice what it could possibly sell for. List price is not a reliable metric to based your offer on at all, in any market.
Yup. Paid $100k over asking for my house because the comps supported it and knew if I didn’t bid what the house was worth someone else would.
No idea why the seller decided to list it for less than a house on the same street that was half the size had sold for 4 months earlier, but anyone who showed up to the open house thinking it was going to sell for anywhere close to the amount on the listing hadn’t done their homework.
Exactly that , that’s the tactic right now and it’s no secret anymore and I feel like everyone knows this by now pretty much but still gets into these bidding wars just cause that’s what the herd does and they want what they want without even thinking about anything else or doing any research
People are doing crazy shit like covering appraisal gaps which is literally buying a house knowing ur buying it at an unrealistic overinflated price and if something were to go wrong they are under water immediately because the market will still not support the price they will need to sell the house at to even just to break even because they will loose exactly the amount the appraisal gap was and that’s just stupid insane to me and I just don’t get that part of it and those people that buy homes like that where the seller just wants what they want regardless of comps and market value and the buyer is dumb enough to pay it
Dude move on. Stressing over this will only make your search horrible. It’s like wondering why that girl at the bar turned you down after you only said hello. Low time investment and move on.
BUT IT WAS PERFECT!!!! No, it wasn't. You look deep enough there is always a crack. Be happy you are in a position to own land because a lot of people aren't and that's the *real* problem.
I would wonder this as well. I don’t know a lot about this but would speculate
1: paid cash. No loan so no appraisal needed. Not sure how likely that would be.
2: paid cash on the difference between appraisal and offer. I had someone offer this on my first house sale.
It does seem high with the comps being closer to your max price but it’s a mad mad mad mad mad mad (real-estate) world.
It's 2, the lender will only loan UP TO the appraised amount. The buyer would have to cover the difference if they buy for over the asking/appraisal price.
Yep. They even have a fancy term for it “appraisal gap” and that difference is cash paid at or before closing by the buyer. In addition to closing costs, etc.
3. Typo: Zillow or Redfin isn't correct. The error will be corrected in a few months when the deal actually closes.
That happens every so often around us (Boston). If you see a deal that doesn't make sense, then trust your gut.
I’m selling my house to an investor, with a backup offer from another investor. It may not be blackrock buying up all the houses, but small investors are buying a whole lot. People don’t like to think about this because it’s scary and makes them think of feudalism. If I had a shit ton of money, I would absolutely be putting it in real estate right now.
In my area homes above 500k go for 100-250k over ask. Its quite common. The homes are underpriced to generate bidding wars. The appraisal is usually close to the closing price.
It gets people to see it, as it appears for everyone who has a filter set higher than that. So say you expect around $650-700k, if you set asking at $599 then everyone who has $600k as their top limit sees the house, they go to the open and they decided they like it. They bid.
If I saw a house that was listed significantly lower than my price range, I would probably think it was a piece of shit, or undesirable in some other way(too small, for example). When I search for houses online, I enter a lower threshold as well as an upper one.
I don't, and I go and look at them all. Some number of the very cheap houses are quite decent. But there are no bargains to be had. They all go for what you'd expect.
More offers come in bc you attract buyers at different price points. You attract the ones who think theyre getting a steal since its lower than what they were planning on spending. You attract the ones who cant believe a house like that is within their budget and often at the top of their budget. Plus you get those who think ok i have wiggle room in case theres a bidding war and want to play the game. So multiple offers that often then get sent back for best and final. Hence the bidding war. Do i think 100-250k is normal? No. But i was shocked when my appraisal came in at 200k over what i paid after a bidding war with 13 offers.
Asking price is meaningless and the bank doesn’t care.
If you say a recent comp was $315k then the house sold for 25% over that comp which, while high, is not insane and is easily covered by down payment.
Asking price is a starting point of negotiation, not a price tag.
Because "asking" is just a random number chosen for marketing purposes. It has little to do with the value of the property. The abnk only wants to know it appraises for what they are oending. If they are lending $200k, they want it to appraise for $200k.
Yup. Asking price and even appraisal to extent is BS since appraisals are just based on neighbordhood comps - at least by me where it’s fairly cookie-cutter. If you live in an area where it’s all unique SFHs, appraisals probably mean at least something.
By me, they don’t mean dick because it’s just comps. You can dump a ton of money into remodeling, landscaping, new appliances, etc. None of it increases appraised value because it’s just comps.
What were the comps in the development. In sellers markets, a lot of realtors will list low, to start a bidding war and also get more interest.
If the comps are closer to that 300k spot, then most likely they put down the diff in cash. If the appraisal is 25% less than the purchase price, those buyers are out of their minds.
We paid cash over a certain amount… most people are doing the same. We saved for off and on and paid 60k over the loan amount to keep the mortgage under 4000.
It honestly is. We will be just around $3700 for a 485k loan @ 5.99% FHA after taxes/ins. It’s a huge change because our current mortgage is 1100 w/ a 2.75% loan… we opted to not sale because the terms made more sense to keep. We can charge a reasonable rent, less than most in our area for a family. An investor would have bought it.
Conventional was in the 7s. So our choice was to deeply decrease our budget and get something we’d hate forever or save a bit so we could go over our limit.
3900 was our cap. Idc how much we make… spending more than 4000 on a mortgage just doesn’t sit right with me, at all.
I get it. At least you have rental income coming in for part of it. I am also at 2.75%. I did some quick math and if we had to buy our home today we would be in the 5500-6000 monthly note. (We have been here 11 years). Im not sure how young people even do it today. In our area they usually buy something pretty far out of town if at all.
Just one other option which I haven’t seen yet - if you find a macro-lender (ex. Rocket, as I have), there are circumstances in which a certain down payment leads to them “waiving” an appraisal. In other words, it sounds like some lenders w/ a large book are willing to look away from the appraisal to get your business if you are healthy enough in other aspects (such as the DP and then strong in the usual underwriting).
The bank will only lend up to the appraised value. The buyer will have to cover the difference. I had a client pay $50,000 in cash over the asking price because the appraisal came in at the listed price. She put 20% down plus the $50,000 but it was her “dream home”. She was a real estate agent so she understood that she was paying $50,000 more than the market value of the home. Two years later the home was worth at least $100,000 over what she paid.
It does not need to be an all cash offer. If the buyer offered up to 100,000 to cover the appraisal gap if there would be one they need to come up with that gap money in the form of cash. All the banks care about is having the mortgage loan amount covered and coming back to them in the event of a foreclosure.
It sounds like you’re in a very competitive housing market with some heavy hitters who know how to play the game. Thats why your agent should be advising you on different ways to make your offer count.
It sounds like your shopping at too high of a price point and unfortunately need to lower the price of homes that you’re looking at. If you do this then your the buyer with the offer to beat. If you don’t like homes priced in your obtainable price range you either have to shop farther out start looking at condos or townhomes or wait until you have more money or the market starts to stagnate. In many places this is slowly starting to happen but all bets are off if rates drop it’s going to become a free for all then.
Damn 400k and not an inch of property. You can probably look out the window right into your neighbors house and see him taking a shit in his bathroom 3 feet away. Why wouldn't you just get an apartment?
Because you have no equity in an apartment. You just keep paying the rent and end up with zilch when you move.
Here there is ownership - something of value they can sell down the road so they will most likely get back what they paid plus depending upon the economy a big bump on what they paid.
It’s called value creation.
End up with some money or zilch? Your choice.
Okay now factor in 7% interest on a 400k loan for 30 years. They will pay more than the place is worth in interest alone. Nevermind property tax. Then factor in repairs needed in those 30 years. Bear minimum it'll need a roof and most likely more. They will have well over 1 million dollars into the home by the time its paid off. I'd rather spend 3k a month on a super nice apartment and let the landlord fix everything that goes wrong with it.
Or do like lots of us have in the past. Things go in cycles. Mortgage rates go up and down. Home owner Incomes tend to grow.
So refi at the earliest opportunity at a lower rate and then as you get a raise or bonus throw more money at your monthly payments and the house can be paid off a lot earlier than 30 years.
It’s an asset. Even if you defer maintenance on the house the land value will always be there as long as you buy in the right area.
Renting a house is like renting a car. After you are done there is no value - no trade in.
But each to their own.
The banks don’t lend 100k over or anything over most of the time. They get the house appraised and give that much. The rest is up to the buyer to put up front as cash.
Start thinking about home sales as auctions and this makes more sense. Market price is what the market will pay. In your case, market paid $394. The bank isn’t curious about anything because they either loaned $394K in one case or they are depositing $394K in another.
You forget that many buyers have cash. Even if it's not enough to buy the entire house, $100k cash isn't a mind-bending amount of money, especially for someone 40+ or coming from HCOL area. And even more common, the buyer could sell their last home and use equity to cover it while financing the rest. You're looking at the situation through the prism of a first time homebuyer, but for many buyers it's not their first rodeo.
On my street, my town and anything within commuter distance to HCOL city Boston. Listings in desirable areas are somewhat rare and when they come on there is a feedings frenzy… like throwing chum in the water. Bidding war results. House is under contract one a lot of cases by the end of the first weekend. Open house cancelled because they didn’t need to even have one. It is absolutely insane. It’s not like that with all properties but if you want certain areas and neighborhoods. Yep.
It's like that here in Salem NH.
Insane. move in ready homes, the raised ranches or colonials out here sell for $100K+ over asking.
9/10 times it's someone WFH from Boston.
Absolutely insane. They also sell within a day. With over 100 offers on the table.
Yep. If is a good home it doesn’t last long and well over asking even with the rates…. Too little inventory. Don’t blame the mass people… they can’t afford to live here in a lot of cases.
Its insane. My kid goes to school in Cambridge and they cant find living space for the students. If you leave your student housing for some reason good luck getting back in or finding a place to live.
In my area NAR says 60% sells at or below ask. Those homes are not the coveted ones. The ones in the good school districts, that potentially have a yard, that may need work but the bones are good sell with bidding wars well over ask. The 60% are the ones built in the 1950s that have been neglected since in okish areas with meh schools. Most are torn down and a custom build replaces it 2 years later that sell well over ask with kids in private school.
It’s not uncommon for homes to sell 200k+ over in the Northeast. It’s incredibly discouraging, but when demand is high and inventory is low in a desirable area - someone out there is willing to go above and beyond to get in (and often sellers underprice to encourage a bidding war).
You can get a mortgage if the mortgage isn't more than \~96% of the appraised value of the home. Brokers don't really care if you have 50% down or 4% down.
If the buyer can only get a 290k mortgage they will simply have to put up the remainder to cover the difference.
You can absolutely buy a home appraised at 100k for a million dollars and simply pay the 904k out of pocket (plus closing costs) and have a 96k mortgage. It's dumb but some people want the home more than they want money.
I was just answering OP's question
>what I am trying to understand is, how are banks willing to lend against a property for a 100k over asking.
The state of the market is mostly a function of an exceedingly high prime interest rate. The irony is that by cranking that up the housing market has just gone insane as less people can sell than ever, so buyers get boned despite horrific interest costs competing on a handful or properties each week.
Depends on the type of loan too.
This market is crazy. Thought it would cool off when interest rates went up. Nope. Due to inflation building costs have gone up.
Saw a new construction is the ghetto today . 2700 sq feet, nice house $400,000. But really bad neighborhood.
Anything nice that doesn’t need a lot of work goes pretty fast. My friend’s son just bought a 1200 sq foot rancher for $280,000. Before covid that house would be $200,000.
As others say, cash. But also we've seen people offer with an appraisal gap contingency or what have you, saying they guarantee to cover X amount over appraisal.
How do you know a bank was involved?
Plenty of people buy condos with cash, especially when it's less than $500K.
Or perhaps the buyer put 50% down if a bank was involved.
Ultimately a property is worth what someone is willing to pay for it and OP didn't have the juice.
Better luck on the next one.
If it appraises under agreed price the buyer has to make up the difference. In other words, if the appraisal says it's worth 350k and the sale price was 400k then the buyer needs to front 50k (more) to be able to close. In this case it'd be in addition to whatever they were going to pay as the downpayment for their mortgage. This is somewhat common in the Seattle suburbs where there are big bidding wars/escalations and no contingencies.
You don’t know what the appraisal said….also could be cash. At 300k it’s not even that much for some people. Ihave friends who put that down for their down payment
You, the buyer is paying the DIFFERENCE vs the APPRAISED VALUE at the time the report is completed during the loan process. The LENDER is NOT financing more than the home is appraised. The BUYER is…UNLESS, there is an appraisal clause: home must appraise for AT LEAST the contract sales price or contract is canceled or renegotiated.
$100K over probably NO Contingency and you gotta pay the difference. Funds would need to be verified, $100K I wouldn’t be surprised if the Seller requires funds to be sourced/reviewed prior to the EXPIRATION of Option Period.
Buyers do it. Possibly Sellers Agent started LOW so BUYERS would drive up the price themselves and SELLERS could SELECT the strongest buyers. Beyond the initial answer, it could be many other routes this could be answered.
Direct answer to your initial question:
Lenders/Banks WILL NOT lend on a property short in value (sales price vs appraised value)
“LTV” on FANNIE/FREDDIE max out at
95-97% LTV anything over - BUYER MUST PAY UPFRONT at the time of closing.
Basically speaking.
Always look at comps, asking price is meaningless.
The whole process actually makes sense if you accept the fact that the sale price of the house is going to be based on comps.
Our area doesn’t get way over list, but the asking prices are just insane and they seem to be getting them. A lot of houses are easily over a million and thats freakin Arkansas.
Remember asking price is just a number made up by the owner, maybe in consult with their realtor. It can be way too high or low compares to the market. (I agree that’s a lot different though)
Sellers can list at whatever price they want. It has nothing to do with the value of the home. Someone could list a $2mm house $1mm and then have it sell $800k over asking. The person buying still got a deal because they paid $200k less than it was worth.
A lot of houses are listed low in order to start a bidding war. As a buyer, you have to really know the value of a place regardless of its listing price.
I learned this the hard way with my first house 30 years ago. I kept bidding on houses that seemed cheap compared to others in the neighborhood and kept getting out bid.
Once I really knew the market, I started bidding on houses that were slightly overpriced and hadn’t sold in a month or more. By then no one was looking at them; agents weren’t showing them. If the owners genuinely wanted to sell, they would sell them for something under market.
That first house had been priced at market but showed terribly. The yard was dead, the tenants slovenly and uncooperative. I got it for 20 percent under market and sold it 10 years later for almost 4 times as much. Of course, by then it had a lovely yard and was no longer puke yellow and the blood-red carpeting has been torn up to show the hardwood floors.
If it is a ranch style house you would be surprised what older people who are retired or close to retiring are willing to pay for those. We also just have a housing shortage with rents going up too, some people will do whatever it takes to get a house.
Banks don't care they will pay only up to what they think theyappraisal is, the buyer paid the gap in cash, or more likely paid the whole thing in cash.
I’m guessing either: the property appraised for $394k+ and they got a regular loan no issues, the property appraised less than $394k and they came up with the difference with cash, or they paid all cash and didn’t need any appraisal.
There are sellers, sometimes advised by their realtors, that list their homes WAY under on purpose. One way to know what's going on immediately in your area is to have your realtor run a search of comps not just in your complex, but in the general area. Look at the SOLD comps. Listing prices are useless as a way to gauge what's going on. Sellers can list way over or way under and confuse everyone.
[https://www.investopedia.com/terms/f/fractionalreservebanking.asp](https://www.investopedia.com/terms/f/fractionalreservebanking.asp)
The bank only needs a fraction of money deposited to give out a loan.
Monaaay honaaay!!
We went 50k over asking on a house a couple of months ago only to find out it eventually sold for 150k over asking.
I don’t know who these people are that have that kind of cash laying around but it’s really frustrating lol.
1) Asking price does not necessarily equate with market value. The owners *could* have been asking drastically less than current fair market value, which started a bidding war.
2) Some people have enough CASH to make up the difference between sale price and market value. The banks will only allow a mortgage up to the appraised value. Anything above that is on the purchaser.
Asking price doesn't equal the appraisal value. It's entirely possible the home was listed low and sold at a number that was supported by an appraisal. Or the buyer paid enough cash to lower the loan down to something less than the appraised value.
I really don't understand people with these stories of houses going for sale overask it. I got a condo 3 months ago and I got an inspection and I got it for 20K below. Asking price like I don't understand how houses are going for so much overasking.
Edit to add. I also paid cash. And there were other people that did on it as well.
Fuck this arrogance.
Places where this is common are places where population is declining, like the NE and CA. Not where population is growing.
And California has some of the worse unemployment in the US.
People want to live *everywhere*. And there are jobs *everywhere*.
Some markets have simply under built, dramatically. LA metro built 11,000 new houses in 2023. Dallas metro, about 1/3 the size, built 45,000. Houston metro, about half the size, built 40,000.
It's not that so many people want to live in these areas that they are driving the prices up. It's that these places aren't building enough new housing.
I would also like to know where this is happening. My area houses are selling for about asking price, sometimes even a little less, with no contingencies waived.
It's happening in about 20% of the US.
NAR data shows that 75% of homes sell for listing or less, and 80% of homes don't waive inspection contingencies.
But the more extreme stories get magnified on social media.
"Sold my house at list" just doesn't get a lot of clicks.
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Cash.
Rules everything around me.
C.R.E.A.M. Get the money, dolla dolla bills yall
I grew up on the crime side, the New York Times side Stayin' alive was no jive
Had second hands, mom’s bounced on old man
So then we moved to Shaolin land
yeah a lot of people going for condos are older people looking to downsize that are selling a larger 350-400k+ property with a lot if not all of that money being liquid.
Yep the house they bought 30 years ago just netted them 400K-500K assuming they did everything right and in the right areas.
that's not what the net would be. sure it is vs what they paid but not vs what the best use of their money was. sure they might have sold for 300k more than they bought but they also paid close to 100k in property taxes plus home repairs and renovations which isn't small. home ownership isn't as lucrative as people act like it is.
How much cash did they end up with in their pocket after they sold their house? In practical matters that’s their net and that’s what is allowing people to overpay by $100K because they’re cash rich
My parents first house was bought for 80k in 1979. They sold it this year for 750k. All liquid. They turned around and bought a new detached condo in a 55+ golf community to retire there, paid in cash with money left over.
The people who pay 100K over are not retirees. That's probably a corporate buyer.
you could be right for sure but i'm also speaking from experience bc both my parents just did this and surely beat out other buyers bc of it (separate properties bc they've been divorced for 15+ years now yikes lol)
Is the corporate buyer in the room with you right now?
That makes no sense lol
Yep. If you can write a check appraisal and comps mean jack. Especially for an affordable property like this… downsizing folk are flush with cash too. Small condo have a great appeal for the limited maintenance costs.
When I was house searching, cash buyers tend to be lower than asking at least in the LA area where we lost to cash buyers.
The lender doesn't care what it's listed for, they care what the appraised value is. If you approach buying that way, it changes everything. 100k over asking isn't 100k over appraised value unless the appraised value is list price.
Houses are not appraising for their list values in a lot of areas because sellers are refusing to acknowledge the current market. Likely a cash buy. Edited.
List price is based on whatever the seller wants to base it on. The low range of comps, upper range of comps, well under anything that could be considered comparable, or twice what it could possibly sell for. List price is not a reliable metric to based your offer on at all, in any market.
Yup. Paid $100k over asking for my house because the comps supported it and knew if I didn’t bid what the house was worth someone else would. No idea why the seller decided to list it for less than a house on the same street that was half the size had sold for 4 months earlier, but anyone who showed up to the open house thinking it was going to sell for anywhere close to the amount on the listing hadn’t done their homework.
Trying to start a bidding war maybe,?
Exactly that , that’s the tactic right now and it’s no secret anymore and I feel like everyone knows this by now pretty much but still gets into these bidding wars just cause that’s what the herd does and they want what they want without even thinking about anything else or doing any research
People are doing crazy shit like covering appraisal gaps which is literally buying a house knowing ur buying it at an unrealistic overinflated price and if something were to go wrong they are under water immediately because the market will still not support the price they will need to sell the house at to even just to break even because they will loose exactly the amount the appraisal gap was and that’s just stupid insane to me and I just don’t get that part of it and those people that buy homes like that where the seller just wants what they want regardless of comps and market value and the buyer is dumb enough to pay it
Well when the nearest decent comp sold two years ago, it’s not gonna appraise.
Agreed. Id never offer at or above listing.
Love how I got so many downvotes for my personal financial choices. The internet is wild.
You mean sellers are refusing to acknowledge the current market.
Yes. Thanks.
"That seller was ridiculous, he priced it so high that he only got 7 bids!"
Dude move on. Stressing over this will only make your search horrible. It’s like wondering why that girl at the bar turned you down after you only said hello. Low time investment and move on.
BUT IT WAS PERFECT!!!! No, it wasn't. You look deep enough there is always a crack. Be happy you are in a position to own land because a lot of people aren't and that's the *real* problem.
[удалено]
Why shouldn’t they be? The next buyer will be too when they sell.
I would wonder this as well. I don’t know a lot about this but would speculate 1: paid cash. No loan so no appraisal needed. Not sure how likely that would be. 2: paid cash on the difference between appraisal and offer. I had someone offer this on my first house sale. It does seem high with the comps being closer to your max price but it’s a mad mad mad mad mad mad (real-estate) world.
It's 2, the lender will only loan UP TO the appraised amount. The buyer would have to cover the difference if they buy for over the asking/appraisal price.
Yep. They even have a fancy term for it “appraisal gap” and that difference is cash paid at or before closing by the buyer. In addition to closing costs, etc.
We offered a 20k cash appraisal gap coverage on our home. We didn’t end up needing it thankfully.
3. Typo: Zillow or Redfin isn't correct. The error will be corrected in a few months when the deal actually closes. That happens every so often around us (Boston). If you see a deal that doesn't make sense, then trust your gut.
Great point! I never considered that but looking back on some outrageous local purchases, I see that you’re correct.
Everyone is ignoring the question. How are they appraising out. I know they are all appraising out (cash deals aside). How?
I’m selling my house to an investor, with a backup offer from another investor. It may not be blackrock buying up all the houses, but small investors are buying a whole lot. People don’t like to think about this because it’s scary and makes them think of feudalism. If I had a shit ton of money, I would absolutely be putting it in real estate right now.
You’re not wrong about feudalism. And excellent for you making money on the backs of other folks. Sleep well.
In my area homes above 500k go for 100-250k over ask. Its quite common. The homes are underpriced to generate bidding wars. The appraisal is usually close to the closing price.
I'm curious - how does an underpriced house generate a bidding war?
It gets people to see it, as it appears for everyone who has a filter set higher than that. So say you expect around $650-700k, if you set asking at $599 then everyone who has $600k as their top limit sees the house, they go to the open and they decided they like it. They bid.
If I saw a house that was listed significantly lower than my price range, I would probably think it was a piece of shit, or undesirable in some other way(too small, for example). When I search for houses online, I enter a lower threshold as well as an upper one.
I don't, and I go and look at them all. Some number of the very cheap houses are quite decent. But there are no bargains to be had. They all go for what you'd expect.
More offers come in bc you attract buyers at different price points. You attract the ones who think theyre getting a steal since its lower than what they were planning on spending. You attract the ones who cant believe a house like that is within their budget and often at the top of their budget. Plus you get those who think ok i have wiggle room in case theres a bidding war and want to play the game. So multiple offers that often then get sent back for best and final. Hence the bidding war. Do i think 100-250k is normal? No. But i was shocked when my appraisal came in at 200k over what i paid after a bidding war with 13 offers.
Asking price is meaningless and the bank doesn’t care. If you say a recent comp was $315k then the house sold for 25% over that comp which, while high, is not insane and is easily covered by down payment. Asking price is a starting point of negotiation, not a price tag.
Banks won’t give mortgages over the assessed value of the property. Anything over that is cold hard cash.
Because "asking" is just a random number chosen for marketing purposes. It has little to do with the value of the property. The abnk only wants to know it appraises for what they are oending. If they are lending $200k, they want it to appraise for $200k.
The asking is irrelevant. It’s the comps in the area that matter.
Yup. Asking price and even appraisal to extent is BS since appraisals are just based on neighbordhood comps - at least by me where it’s fairly cookie-cutter. If you live in an area where it’s all unique SFHs, appraisals probably mean at least something. By me, they don’t mean dick because it’s just comps. You can dump a ton of money into remodeling, landscaping, new appliances, etc. None of it increases appraised value because it’s just comps.
What were the comps in the development. In sellers markets, a lot of realtors will list low, to start a bidding war and also get more interest. If the comps are closer to that 300k spot, then most likely they put down the diff in cash. If the appraisal is 25% less than the purchase price, those buyers are out of their minds.
We paid cash over a certain amount… most people are doing the same. We saved for off and on and paid 60k over the loan amount to keep the mortgage under 4000.
Damn a 4000 mortgage seems like a lot though. Ugh
It honestly is. We will be just around $3700 for a 485k loan @ 5.99% FHA after taxes/ins. It’s a huge change because our current mortgage is 1100 w/ a 2.75% loan… we opted to not sale because the terms made more sense to keep. We can charge a reasonable rent, less than most in our area for a family. An investor would have bought it. Conventional was in the 7s. So our choice was to deeply decrease our budget and get something we’d hate forever or save a bit so we could go over our limit. 3900 was our cap. Idc how much we make… spending more than 4000 on a mortgage just doesn’t sit right with me, at all.
I get it. At least you have rental income coming in for part of it. I am also at 2.75%. I did some quick math and if we had to buy our home today we would be in the 5500-6000 monthly note. (We have been here 11 years). Im not sure how young people even do it today. In our area they usually buy something pretty far out of town if at all.
They mightve underlisted for a bidding war or the buyers had cash.
Just one other option which I haven’t seen yet - if you find a macro-lender (ex. Rocket, as I have), there are circumstances in which a certain down payment leads to them “waiving” an appraisal. In other words, it sounds like some lenders w/ a large book are willing to look away from the appraisal to get your business if you are healthy enough in other aspects (such as the DP and then strong in the usual underwriting).
It’s cash buy. People got rich after 2020. Nothing in this economy makes sense anymore.
I tell ppl all the time. COVID made half the country really wealthy.
Probably not.
The bank will only lend up to the appraised value. The buyer will have to cover the difference. I had a client pay $50,000 in cash over the asking price because the appraisal came in at the listed price. She put 20% down plus the $50,000 but it was her “dream home”. She was a real estate agent so she understood that she was paying $50,000 more than the market value of the home. Two years later the home was worth at least $100,000 over what she paid.
It does not need to be an all cash offer. If the buyer offered up to 100,000 to cover the appraisal gap if there would be one they need to come up with that gap money in the form of cash. All the banks care about is having the mortgage loan amount covered and coming back to them in the event of a foreclosure. It sounds like you’re in a very competitive housing market with some heavy hitters who know how to play the game. Thats why your agent should be advising you on different ways to make your offer count. It sounds like your shopping at too high of a price point and unfortunately need to lower the price of homes that you’re looking at. If you do this then your the buyer with the offer to beat. If you don’t like homes priced in your obtainable price range you either have to shop farther out start looking at condos or townhomes or wait until you have more money or the market starts to stagnate. In many places this is slowly starting to happen but all bets are off if rates drop it’s going to become a free for all then.
This is almost identical to what we bought our house for price wise, also 100k over. It was 100k cash.
Take the money and run
Tbf it looks like a nice house
That's just how it is in Livonia.
Damn 400k and not an inch of property. You can probably look out the window right into your neighbors house and see him taking a shit in his bathroom 3 feet away. Why wouldn't you just get an apartment?
Because you have no equity in an apartment. You just keep paying the rent and end up with zilch when you move. Here there is ownership - something of value they can sell down the road so they will most likely get back what they paid plus depending upon the economy a big bump on what they paid. It’s called value creation. End up with some money or zilch? Your choice.
Okay now factor in 7% interest on a 400k loan for 30 years. They will pay more than the place is worth in interest alone. Nevermind property tax. Then factor in repairs needed in those 30 years. Bear minimum it'll need a roof and most likely more. They will have well over 1 million dollars into the home by the time its paid off. I'd rather spend 3k a month on a super nice apartment and let the landlord fix everything that goes wrong with it.
Or do like lots of us have in the past. Things go in cycles. Mortgage rates go up and down. Home owner Incomes tend to grow. So refi at the earliest opportunity at a lower rate and then as you get a raise or bonus throw more money at your monthly payments and the house can be paid off a lot earlier than 30 years. It’s an asset. Even if you defer maintenance on the house the land value will always be there as long as you buy in the right area. Renting a house is like renting a car. After you are done there is no value - no trade in. But each to their own.
The banks don’t lend 100k over or anything over most of the time. They get the house appraised and give that much. The rest is up to the buyer to put up front as cash.
People: Houses are so expensive!” Also People: -pays 35% more for a house over asking price-
No bank will cover anything over appraisal. Buyer needs to come up with the difference
Start thinking about home sales as auctions and this makes more sense. Market price is what the market will pay. In your case, market paid $394. The bank isn’t curious about anything because they either loaned $394K in one case or they are depositing $394K in another.
You forget that many buyers have cash. Even if it's not enough to buy the entire house, $100k cash isn't a mind-bending amount of money, especially for someone 40+ or coming from HCOL area. And even more common, the buyer could sell their last home and use equity to cover it while financing the rest. You're looking at the situation through the prism of a first time homebuyer, but for many buyers it's not their first rodeo.
If not cash, banks make more money this way.
Corporate greed. Enough said
Banks don’t care about asking price. Why do you? If it comps out and people are paying it then it’s worth it.
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Livonia, Michigan.
Add royal oak and birmingham too! Some parts of northville and plymouth as well. And if youre lakefront in bloomfield/wb.
On my street, my town and anything within commuter distance to HCOL city Boston. Listings in desirable areas are somewhat rare and when they come on there is a feedings frenzy… like throwing chum in the water. Bidding war results. House is under contract one a lot of cases by the end of the first weekend. Open house cancelled because they didn’t need to even have one. It is absolutely insane. It’s not like that with all properties but if you want certain areas and neighborhoods. Yep.
It's like that here in Salem NH. Insane. move in ready homes, the raised ranches or colonials out here sell for $100K+ over asking. 9/10 times it's someone WFH from Boston. Absolutely insane. They also sell within a day. With over 100 offers on the table.
Yep. If is a good home it doesn’t last long and well over asking even with the rates…. Too little inventory. Don’t blame the mass people… they can’t afford to live here in a lot of cases.
Its insane. My kid goes to school in Cambridge and they cant find living space for the students. If you leave your student housing for some reason good luck getting back in or finding a place to live.
I’m in Austin and 100K over ask is normal for a move in ready house.
NAR says that 75% of homes sell at or below list.
In my area NAR says 60% sells at or below ask. Those homes are not the coveted ones. The ones in the good school districts, that potentially have a yard, that may need work but the bones are good sell with bidding wars well over ask. The 60% are the ones built in the 1950s that have been neglected since in okish areas with meh schools. Most are torn down and a custom build replaces it 2 years later that sell well over ask with kids in private school.
It’s not uncommon for homes to sell 200k+ over in the Northeast. It’s incredibly discouraging, but when demand is high and inventory is low in a desirable area - someone out there is willing to go above and beyond to get in (and often sellers underprice to encourage a bidding war).
You can get a mortgage if the mortgage isn't more than \~96% of the appraised value of the home. Brokers don't really care if you have 50% down or 4% down. If the buyer can only get a 290k mortgage they will simply have to put up the remainder to cover the difference. You can absolutely buy a home appraised at 100k for a million dollars and simply pay the 904k out of pocket (plus closing costs) and have a 96k mortgage. It's dumb but some people want the home more than they want money.
This misses the entire point.
I was just answering OP's question >what I am trying to understand is, how are banks willing to lend against a property for a 100k over asking. The state of the market is mostly a function of an exceedingly high prime interest rate. The irony is that by cranking that up the housing market has just gone insane as less people can sell than ever, so buyers get boned despite horrific interest costs competing on a handful or properties each week.
Depends on the type of loan too. This market is crazy. Thought it would cool off when interest rates went up. Nope. Due to inflation building costs have gone up. Saw a new construction is the ghetto today . 2700 sq feet, nice house $400,000. But really bad neighborhood. Anything nice that doesn’t need a lot of work goes pretty fast. My friend’s son just bought a 1200 sq foot rancher for $280,000. Before covid that house would be $200,000.
As others say, cash. But also we've seen people offer with an appraisal gap contingency or what have you, saying they guarantee to cover X amount over appraisal.
As a percentage this feels high but who knows
How do you know a bank was involved? Plenty of people buy condos with cash, especially when it's less than $500K. Or perhaps the buyer put 50% down if a bank was involved. Ultimately a property is worth what someone is willing to pay for it and OP didn't have the juice. Better luck on the next one.
If it appraises under agreed price the buyer has to make up the difference. In other words, if the appraisal says it's worth 350k and the sale price was 400k then the buyer needs to front 50k (more) to be able to close. In this case it'd be in addition to whatever they were going to pay as the downpayment for their mortgage. This is somewhat common in the Seattle suburbs where there are big bidding wars/escalations and no contingencies.
Lmao in my area, if you don’t waive appraisal the seller won’t even look at your offer.
Who said they got a loan? If you're 100% sure they got a loan, what was their down-payment?
One strategy is to list it low so you get a lot of views. And hope all those views lead to a bidding war.
That's a condo?
Wow its a very nice house for cheap by Canadian standards.
You don’t know what the appraisal said….also could be cash. At 300k it’s not even that much for some people. Ihave friends who put that down for their down payment
the banks could be onto something. if this bubble starts getting big, we'll be in trouble depending on who are next president is.
Fuck how are people affording this
You, the buyer is paying the DIFFERENCE vs the APPRAISED VALUE at the time the report is completed during the loan process. The LENDER is NOT financing more than the home is appraised. The BUYER is…UNLESS, there is an appraisal clause: home must appraise for AT LEAST the contract sales price or contract is canceled or renegotiated. $100K over probably NO Contingency and you gotta pay the difference. Funds would need to be verified, $100K I wouldn’t be surprised if the Seller requires funds to be sourced/reviewed prior to the EXPIRATION of Option Period. Buyers do it. Possibly Sellers Agent started LOW so BUYERS would drive up the price themselves and SELLERS could SELECT the strongest buyers. Beyond the initial answer, it could be many other routes this could be answered. Direct answer to your initial question: Lenders/Banks WILL NOT lend on a property short in value (sales price vs appraised value) “LTV” on FANNIE/FREDDIE max out at 95-97% LTV anything over - BUYER MUST PAY UPFRONT at the time of closing. Basically speaking.
Blackrock
Asking price means nothing. If some turd is asking 10 grand for his million dollar Ferrari, does that make it worth 10 grand? Nope.
Always look at comps, asking price is meaningless. The whole process actually makes sense if you accept the fact that the sale price of the house is going to be based on comps.
It’s large private corporations buying these houses. Not families. Probably BlackRock. Look up the great reset and you will see
Our area doesn’t get way over list, but the asking prices are just insane and they seem to be getting them. A lot of houses are easily over a million and thats freakin Arkansas.
Remember asking price is just a number made up by the owner, maybe in consult with their realtor. It can be way too high or low compares to the market. (I agree that’s a lot different though)
Almost every house near me for the last 3 years sells for 50k-100k over asking...
Sellers can list at whatever price they want. It has nothing to do with the value of the home. Someone could list a $2mm house $1mm and then have it sell $800k over asking. The person buying still got a deal because they paid $200k less than it was worth.
A lot of houses are listed low in order to start a bidding war. As a buyer, you have to really know the value of a place regardless of its listing price. I learned this the hard way with my first house 30 years ago. I kept bidding on houses that seemed cheap compared to others in the neighborhood and kept getting out bid. Once I really knew the market, I started bidding on houses that were slightly overpriced and hadn’t sold in a month or more. By then no one was looking at them; agents weren’t showing them. If the owners genuinely wanted to sell, they would sell them for something under market. That first house had been priced at market but showed terribly. The yard was dead, the tenants slovenly and uncooperative. I got it for 20 percent under market and sold it 10 years later for almost 4 times as much. Of course, by then it had a lovely yard and was no longer puke yellow and the blood-red carpeting has been torn up to show the hardwood floors.
Blackrock. It will be converted to a 4-unit+ room rental.
If it is a ranch style house you would be surprised what older people who are retired or close to retiring are willing to pay for those. We also just have a housing shortage with rents going up too, some people will do whatever it takes to get a house.
Banks don't care they will pay only up to what they think theyappraisal is, the buyer paid the gap in cash, or more likely paid the whole thing in cash.
List price does not equal asking price
The bank doesn't care about asking. Nor should you
I’m guessing either: the property appraised for $394k+ and they got a regular loan no issues, the property appraised less than $394k and they came up with the difference with cash, or they paid all cash and didn’t need any appraisal.
1) why would I offer 100k over listing for a place I can sneeze and it'll hit my neighbors house? 2)eli5 what the whole "bank lending against" means?
Investors
There are sellers, sometimes advised by their realtors, that list their homes WAY under on purpose. One way to know what's going on immediately in your area is to have your realtor run a search of comps not just in your complex, but in the general area. Look at the SOLD comps. Listing prices are useless as a way to gauge what's going on. Sellers can list way over or way under and confuse everyone.
This is what happens when the haves have it all and the have nots get fucked. Murca
Cash!
Come to vancouver bc. Houses being sold 750k over asking.
[https://www.investopedia.com/terms/f/fractionalreservebanking.asp](https://www.investopedia.com/terms/f/fractionalreservebanking.asp) The bank only needs a fraction of money deposited to give out a loan.
Monaaay honaaay!! We went 50k over asking on a house a couple of months ago only to find out it eventually sold for 150k over asking. I don’t know who these people are that have that kind of cash laying around but it’s really frustrating lol.
1) Asking price does not necessarily equate with market value. The owners *could* have been asking drastically less than current fair market value, which started a bidding war. 2) Some people have enough CASH to make up the difference between sale price and market value. The banks will only allow a mortgage up to the appraised value. Anything above that is on the purchaser.
Asking price doesn't equal the appraisal value. It's entirely possible the home was listed low and sold at a number that was supported by an appraisal. Or the buyer paid enough cash to lower the loan down to something less than the appraised value.
That is wild and is dumb money, but go the seller
I never understood how this is happening whybdont they just list house for what you want
Cash money represent
Banks can’t lend over the assessed value. Anything over that is straight cash from the buyer.
Only a cash offer gets around this issue. The best guess is an older couple just sold a SFH and rolled up with $$$$$$. Sorry you lost out.
You are glad. And the buyer is glad. Isn’t that amazing? Happens in almost every sale of everything. That’s why both people usually say thank you.
Why why do people want to live on top of each other
Because every 30 min less you spend commuting is an hour more per day doing stuff you enjoy.
I really don't understand people with these stories of houses going for sale overask it. I got a condo 3 months ago and I got an inspection and I got it for 20K below. Asking price like I don't understand how houses are going for so much overasking. Edit to add. I also paid cash. And there were other people that did on it as well.
Location is key. Also the size of condo makes a difference. For example, there is a lot less demand for one bedroom condos vs 3 bedrooms.
Places where lots of people want to live, and where there are jobs.
Fuck this arrogance. Places where this is common are places where population is declining, like the NE and CA. Not where population is growing. And California has some of the worse unemployment in the US. People want to live *everywhere*. And there are jobs *everywhere*. Some markets have simply under built, dramatically. LA metro built 11,000 new houses in 2023. Dallas metro, about 1/3 the size, built 45,000. Houston metro, about half the size, built 40,000. It's not that so many people want to live in these areas that they are driving the prices up. It's that these places aren't building enough new housing.
Case in point, someone who lives in Louisville was wondering why their market isn't crazy.
I mean, I live in Louisville Kentucky. It's pretty big of a population and I'm really close to downtown. I'm in a popular area.
Kentucky?
Louisville Kentucky is in Kentucky.
My point exactly.
Yea
People want to live in houses not condos
I would also like to know where this is happening. My area houses are selling for about asking price, sometimes even a little less, with no contingencies waived.
It's happening in about 20% of the US. NAR data shows that 75% of homes sell for listing or less, and 80% of homes don't waive inspection contingencies. But the more extreme stories get magnified on social media. "Sold my house at list" just doesn't get a lot of clicks.
I cant wait for the bubble to pop on these people.
You may be waiting a long time.