Bank Appraisal of NT$9 Million, Below the NT$10 Million Sale Price, Allows a Loan of Only NT$7.2 Million

Lu Kun-fu, chairman of the Republic of China Real Estate Finance Knowledge Development Association, said that when banks approve loans, they "take the lower" of the sale price and the appraised value as the basis for calculating the loan ratio. He gave an example: for a home with a sale price of NT$10 million, even if the buyer can borrow 80%, if the bank appraises it at only NT$9 million, the maximum loan is NT$7.2 million, not the NT$8 million originally expected.

Lu Kun-fu said many homebuyers mistakenly believe that a 20% down payment is enough to buy a home. Once the bank's appraisal is lower than the sale price, the 80% loan they had expected is reduced, and the buyer makes up the difference. He also said: "If you can't come up with it, that is a breach of contract, and a down payment of nearly NT$2 million could be gone."

Another hypothetical case involves a sale price of NT$9 million, a maximum loan ratio of 80%, and a down payment of about NT$1.8 million. If the bank appraises the home at NT$8 million, the theoretical maximum loan is NT$6.4 million, and the buyer must prepare a down payment of at least NT$2.6 million; if the appraisal is NT$9 million, the theoretical maximum loan is NT$7.2 million.

Huang Chao-min, head of Zhengxin Real Estate Appraisers Joint Firm, noted that a home's sale price is the result of negotiation between a specific buyer and seller, and may be affected by the terms of the transaction and the buyer's preferences; a bank appraisal treats the home as collateral and assesses its market value. He said an appraisal is a lagging indicator of home prices: in a bull market the appraisal may be below market prices, and in a bear market it may be above them.

In Zhouziyang, Wugu, New Taipei, one buyer got only a 70% loan because the appraisal fell short, had to raise nearly NT$1 million more in down payment at short notice, and in the end borrowed from a financing company to complete the handover. Lu Kun-fu advises that, in addition to the down payment originally prepared, buyers keep about 10% more in funds as a cushion, and get an online valuation before making an offer; submitting formal applications to 3 banks is about right, and a special clause for loan shortfall can be negotiated with the seller before signing the contract, specifying the minimum loan amount or ratio to be obtained and how matters will be handled if the loan cannot be obtained.