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Exploring the Legal Definition of Original Value in Real Estate
Definition & meaning
The term "original value" refers to the amount used to determine the value of a property in a residential mortgage transaction. Specifically, it is defined as the lesser of two amounts: the sales price of the property as outlined in the purchase contract or the appraised value of the property at the time the mortgage transaction is completed. For refinancing transactions, the original value is strictly the appraised value that the lender used to approve the refinance.
Table of content
Legal use & context
Original value is commonly used in the context of residential mortgages, particularly in determining loan amounts and insurance requirements. It plays a crucial role in the following legal areas:
Real estate transactions
Mortgage lending
Property appraisals
Understanding original value is important for both lenders and borrowers, as it affects loan terms and insurance premiums. Users can manage related forms and transactions through resources like US Legal Forms, which offers templates for mortgage agreements and refinancing documents.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A homeowner purchases a property for $300,000. The appraised value at the time of the mortgage is $290,000. The original value for the mortgage will be $290,000, as it is the lesser amount.
Example 2: A homeowner refinances their mortgage. The appraised value for the refinance is $350,000. The original value for this transaction is $350,000 since it is the only appraised value considered. (hypothetical example)
Relevant laws & statutes
Original value is defined under federal law, specifically in 12 USCS § 4901. This statute outlines the definitions and terms relevant to homeowners' protection in mortgage transactions.
Comparison with related terms
Term
Definition
Appraised Value
The value determined by a professional appraiser at the time of the mortgage transaction.
Market Value
The estimated price a property would sell for in the current market conditions.
Sales Price
The amount agreed upon by the buyer and seller in a purchase contract.
Common misunderstandings
What to do if this term applies to you
If you are involved in a mortgage transaction, understanding the original value is essential for determining your loan amount and insurance needs. You can:
Review your mortgage documents to identify the original value.
Consult with your lender or a real estate professional for clarification.
Explore US Legal Forms for templates and resources related to mortgages and refinancing.
For complex situations, consider seeking professional legal advice.
Find a legal form that suits your needs
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Original value is determined at the time of the mortgage transaction.
It is the lesser of the sales price or the appraised value.
For refinancing, only the appraised value is considered.
Key takeaways
FAQs
Original value is the lesser of the sales price or appraised value at the time of the mortgage transaction, while appraised value is an estimate made by a professional appraiser.
Original value impacts the amount you can borrow and may influence your mortgage insurance premiums.
Yes, if you believe the appraised value is incorrect, you can request a reconsideration or a second appraisal.