Is "Discount" Off Of Appraised Value Or Outstanding Balance?

I hear investors constantly talk about the discount they revcieved or are shooting for, but no one ever specifies if the discount is off of appraised value or outstanding balance:

EX: House is worth $200,000 that has a balance of $180,000, FHA.
We know FHA discounts 18%, or to 82%, but would this mean I should be able to get this property @ $164,000, or can I get it for $147,600?

Any advice appreciated.

Comments(4)

  • TheShortSalePro27th August, 2003

    FHA insured loans must consider 2 ratios both involving as-is, FMV. You correctly identified one ratio as (net proceeds must be equal to or greater than) 82% of the property's as-is, FMV. The other ratio is
    FMV divided by mortgage balance must be equal to or greater than 63%.

    In most cases the "discount" is predicated upon the property's as-is, fair market value.

  • alubeck27th August, 2003

    SSP,
    Very helpful. Can you walk through an example of the second ratio - the 63% threshold?

  • TheShortSalePro27th August, 2003

    Anyone purchasing the print version of A Short Sale Primer is entitled to one hour of private, E-Coaching. Check out the preview.

  • alubeck27th August, 2003

    Gotcha. Will follow up after the holliday.

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