Before the bank loans out money to someone, they want to make sure the asset being purchased is actually worth the money they are lending out. If the borrower can’t pay, the bank will want to sell the house to recoup the loan money. So giving a borrower $500k for a house appraised at $400k wouldn’t be smart. In this market, house prices are increasing at a faster rate than appraisal values. So this is a risk the seller might face, where the market says the house is worth $500k but the appraisal says it is $450. With cash, there is no appraisal. The seller has no risk of the deal falling apart due to appraisal issues. The buyer just ponies up $500k.
Latest Answers