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Showing posts from April 8, 2008

Mortgage Appraisals & Real Estate Contracts

Most every Buyer I represent in a home purchase needs a mortgage financing contingency as part of their contract. That is the weasel clause that lets a Buyer escape out if he cannot get the necessary financing. Mortgage lenders use a variety of factors to decide if they are going to lend that money, one of which being the property's appraised value: "is there enough value in the home to justify (secure) the loan"? If the value isn't there, the loan will not be approved, if the loan is not approved, the Buyer invokes the contingency. if the Buyer invokes the contingency, the deal is (almost always) canceled.

Back in February, I posted comments on a presentation made to the Illinois Real Estate Lawyers Association regarding mortgage appraisals in the current market. The presenter described the tighter standards lenders were imposing on their appraisers to try to guard against lending too much money against properties located in areas suffering declining market values.