Why is the lender using the sales price as the value of my home instead of the appraised value? This is a very common question and comes up extremely often when a consumer is buying a home and they are getting a great deal on the home for one reason or another but the lender uses the sales price instead of the appraised value to determine the Loan to Value. So why is it this way and why does the lender not count the equity you already have in a home if the home appraises for more than you are buying it for? There are many reasons for this and one of the best reasons is because in a lenders eyes a home is only worth what someone is willing to pay for the home. Therefore, even though the home appraises for more than what you are buying it for does not mean that it could actually sell for more than what you are buying it for. This way lenders can protect themselves from inflated appraisals, home-buying scams, and poor lending practices.

In some cases where the property is an investment property you may find some hard money lenders that will lend based on the future value of a home after renovations have been done. This is a very specific type of program designed for investment properties, rehabs or property flippers. It is not used for primary residences.

 

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