Can/Will a bank lend on its own foreclosed property?

Question

I have an offer in on a bank owned house but the appraisal came in about $7k less than my offer.  In my opinion, the appraisal is too low.  The seller (a small bank) also believes that the appraisal is too low and doesn't want to reduce the price any lower.  However, the mortgage company that I went through says that it will only lend based on the original appraisal.

Is it possible to go straight to the bank that owns the property with my original offer and will they fund the deal themselves?  I have enough cash for a 20% down payment and my credit scores are in the low 800's.

Dave.Henry@supremelending.com · Accepted Answer

Most likely they can and will make the loan. However, if they sell their loans to investors (as most small banks do), they will be held to the investors requirements. That means the real issue is getting 20% down. Your lender or the bank should be more than happy to make the loan at 80% of the appraised value (not the purchase price). If you can swing the extra down payment, it should be a non issue. 

If you agreed to buy the home for 100,000 and put 20,000 down to get to 80% and now the house comes in at 93,000 on the appraisal, keep your 20,000 as a down payment. Now your loan is 73,000 (instead of 80,000) which means you are only financing 78% of the home's appraised value.

800+ credit score and 78% loan to value,that's a slam dunk loan!

Good job on your credit scores!

Adoptive Father · Answer

Banks do commonly lend on their own foreclosures.  Will they lend on the purchase price even if it exceeds the appraised value?  Honestly I am not sure.  Different banks have different policies and procedures.  I doubt you will find a thirty year fixed rate mortgage for more than the appraised value.

Cheryl Cholley · Answer

I'd think the bank would be open to such a proposal.  They only want to get out of the property, not make a huge profit.

Can/Will a bank lend on its own foreclosed property?

2 Answers