My realtor has explained it but I just need this dumbed down. When I offer $5,000 in appraisal gap coverage, what does that mean? Does it automatically mean I’ll pay that, or in what specific situations will I pay it?
Maybe I just don’t get what “appraise” means but the whole idea is kind of confusing.
In: 2
You offer $400,000 for the house, but when the bank comes calling to appraise the home before signing your loan, they think it’s only worth $395,000. They don’t want to be stuck with an asset that’s worth less than they’ve sunk into it, so they won’t loan you more than the appraised value.
That $5,000 in gap coverage is a promise to the seller to cover the difference between the agreed offer and the loan amount from the bank, that way even if you can’t get the loan you wanted, he still gets his full $400k.
My realtor has explained it but I just need this dumbed down. When I offer $5,000 in appraisal gap coverage, what does that mean? Does it automatically mean I’ll pay that, or in what specific situations will I pay it?
Maybe I just don’t get what “appraise” means but the whole idea is kind of confusing.
In: 2
You offer $400,000 for the house, but when the bank comes calling to appraise the home before signing your loan, they think it’s only worth $395,000. They don’t want to be stuck with an asset that’s worth less than they’ve sunk into it, so they won’t loan you more than the appraised value.
That $5,000 in gap coverage is a promise to the seller to cover the difference between the agreed offer and the loan amount from the bank, that way even if you can’t get the loan you wanted, he still gets his full $400k.
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