A buyer contracts at $310,000 and the appraisal comes in at $326,000, and later asks what the 80% cancellation point is measured against.
Correct Answer
B) The $310,000 contract price, being the lesser of the two figures
Original value is defined as the lesser of the sales price in the contract or the appraised value at consummation, so the $310,000 contract price governs and 80% of it is $248,000. Other choices: the $326,000 appraisal is the higher figure and the statute takes the lower; averaging to $318,000 is not a method the definition offers; and current market value is what the borrower may want to use, but the statutory cancellation points are all measured against the original figure. Source: 12 USC 4901(12), definition of original value
Why This Is the Correct Answer
Original value is defined as the lesser of the sales price in the contract or the appraised value at consummation, so the $310,000 contract price governs and 80% of it is $248,000. Other choices: the $326,000 appraisal is the higher figure and the statute takes the lower; averaging to $318,000 is not a method the definition offers; and current market value is what the borrower may want to use, but the statutory cancellation points are all measured against the original figure. Source: 12 USC 4901(12), definition of original value
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