We are all familiar with appraisals being needed to certify the value of a property sale is adequate for the amount of money being loaned to a buyer, but there is a new method lenders are using to help homebuyers maintain buying power — a Property Value Certificate (PVC).
This process allows a buyer to give assurance to a seller that the value on the purchase offer is certified — and the buyer could even choose to waive an appraisal contingency, making their offer even stronger. An example of how PVC’s are used is below:
A home is listed at $800,000, but the buyer wants to offer $825,000. The buyer is approved for a loan with a 20% down payment. The lender provides an underwritten approval loan amount of $660,000, with a PVC approval at the purchase price of $825,000. The appraisal comes in at the original list price of $800,000.
A typical lender would lower the loan amount to 80% of the appraised value, but with a PVC, the lender commits to lend at the amount shown on the PVC. And, no additional down payment or borrower-paid mortgage insurance would be required even if the appraisal came in short.
Jason Cook, the Eastern Shore manager of Embrace Home Loans, whose company offers PVC’s to buyers, remarked, “In an extremely competitive purchase environment, consumers should not only compare rate and cost of mortgage financing, but also the programs available giving them the most competitive position possible. Programs like the Property Value Certificate have the potential of making buyers offers who utilize them stand apart from others by eliminating appraisal and financing contingencies found in most offers”.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
