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Paying More Than Appraised Value For Your New Miami Home

I am seeing it more and more these days…folks are paying more than appraised value when buying a home in Miami.  It’s happening in Pinecrest, Palmetto Bay, Kendall, South Miami, High Pines, Ponce Davis, well, let’s just say it’s happening in all of Miami-Dade County.

One thing first time home buyers think is “well, the home’s got to appraise, right?”  Armed with this thought, they don’t think twice about assuming that if a home seller is asking too much for his home, he’s going to have to come down in price when the appraisal is done.  Right?  Well, not always!  Depending on whether the home has some really good features, and most importantly, no competition as far as other available properties, the seller may be able to hold out and get more than his home actually appraises for.

How is this possible if the home is being financed?  It’s important to understand that a bank will not lend on more than the appraised value of the home.  But that doesn’t mean they will stop the buyer from coming up with the difference and paying for that out of pocket.  And we are seeing buyers pay over appraised value of a house time and time again in this market.

The reasons boil down to three main ones: 1) there isn’t enough inventory of available homes for sale; 2) home buyers have a lot of competition, both in the form of other owner occupant buyers as well as investors; and 3) the interest rates are so ridiculously low that everyone’s trying to take advantage of them!  It would be foolish to keep waiting in the hopes of another home you like coming on the market when perhaps paying that extra $10,000 is all that stands between you and getting that offer accepted.

Paying over appraised value is not a purchasing tactic everyone can take advantage of.  After all, you need to have that extra money in order to do it.  The difference cannot be financed.  The whole point is that the bank will not lend the money, so the buyer has to “assume the risk” of paying over appraised value by paying cash for the difference.

So how do you know if it’s time to do it?  Getting solid numbers from your Realtor and market statistics goes a long way in helping you make this decision.  With the interest rates available on a 30 year fixed mortgage today, it’s definitely worth considering.  Last week one of my buyers closed with a rate of 3.375%.  She was able to get into a contract where the property appraised at contract price so she didn’t have to ponder this option.  But the rate she got is so sweet and she is now assured that for the next 30 years, her monthly principal and interest payment will not change.  That’s what folks paying over appraised value are trying to secure.  A great rate on a great house!

 

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These articles are not intended to give legal or tax advice, and you should consult your attorney or financial advisor for additional information.

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