negotiation opinion of what a house should bring to its local market, i.e., its geographical area, generally an area such as a suburb or neighborhood. More simply it is also defined as "What a seller is willing to sell at and what a buyer is willing to buy at". The "appraised value" is an evaluation of a property’s worth at a given point in time that is performed and determined by a professional appraiser. The appraised value is a crucial factor in loan underwriting and determines how much money may be borrowed and under what terms. For example, the Loan to Value (LTV) ratio is based on either the appraised value or sales price; whichever is less. Where LTV is greater than 80%, the lender generally will require the borrower to buy mortgage insurance. For example, if the sale price of a home is $400,000.00 and a buyer is putting down 20% (borrowing 80%) the loan amount would be $320,000.00. If the appraisal came in at only $390,000.00 then 80% would be a loan of $312,000.00. In this case, if the buyer still wanted to borrow $320,000.00 and still purchase the home for $400,000.00 (unless the seller is willing to renegotiate the price), the buyer would now be borrowing 82.05% of the appraisal and the lender would require mortgage insurance. "Assessed value" (different from appraised value) is the amount local or state government has designated for a specific property and frequently differs from market value or appraised value. The assessed value is used as the basis of property tax and when a property tax is levied. The assessed value of a piece of real estate is not necessarily equal to the property’s market value or its appraised value. Approximately 60% of U.S. properties are assessed higher than their current market value; however, this does not reflect the home’s actual value.
6
Powered by FlippingBook