Although I have not yet acquired a formal appraisal of the value of the house, a study of recent sales of comparable property in the area supports the value of $120,000. This area of Chicago is undergoing the “Gentrification” process whereby younger, upwardly mobile families are buying older houses and fixing them up to live in or resell.
People in the market appear to be willing to pay a premium for a rebuilt house, both in terms of selling price overall and on a square-foot basis. An appraisal can be obtained from any number of qualified appraisers at the lender’s request.
Terms of the Expected Sale Lenders in this neighborhood have been lending 80% of the appraised value of a first mortgage. Buyers normally expect to make a down payment of 10% to 15% of the selling price. Many sellers are willing to carry a second mortgage on the houses for up to 10% of the selling price. This loan request is based on that set of assumptions about the terms of the resale.