Competitive Housing Market - Form 22AD

Do you know about the buffer?

Every buyer’s agent wants to write a strong offer.  One of the tools you can use to build a firm offer is the 22 AD form.  Typically you ask your buyer how much, in addition to their downpayment can they bring to the table if the appraisal comes in low.  Then you plug that figure in the 22 AD form.

That makes sense, right? However, in most cases, a buyer will not need to bring additional funds to close because of a buffer that exists in the event  the appraisal comes in lower than the purchase price.

So, continue to ask your buyers how much more they can afford, more than their downpayment, in the case of a low appraisal,  but more importantly, ask your loan officer what you can put in the 22 AD without impacting the buyer’s funds to close.

Here is a quick example. If you have a million-dollar purchase price and 20% down, so an $800,000 loan amount, and let’s say the maximum loan to value in the program is 95%, then that means the appraisal could come in $157,000 lower without the buyer having to bring an additional penny to closing.

Kind of radical Huh!

So talk to your loan officer before you complete your 22 AD to present the most substantial offer possible.

If you want to learn more about the math of a low appraisal, reach out.  I also have a class coming out soon on this topic.