Questioning my Realtor
A mortgage lender will not usually lend more than they could get if they had to repossess the property and sell it to recover their investment (in the U.S. it is generally accepted that 80% of market value is the golden number that makes the mortgage work).  That's why an appraisal is required. Even with 50% down, the numbers might not add up if your property is appraised very low (extremely unlikely, though. It's more likely your realtor is inexperienced). My realtor told me that even though they're only asking for 1/2    the money and have excellent credit that the mortgage company may   not lend it to them if I'm over priced. Is this true? I've never heard of it before. It is a chance, but it is a red herring to the discussion. Having excellent credit has nothing to do with being eligible for a debt object of a specific size. Just because you have excellent credit, would you get approved for a property of $10,000,000 if you only made $35,000 a year (and had no other net worth)? But regarding your potential buyers, a chance vs a good chance is different. Your realtor just told you some basic always true lending fact that has nothing to do with your situation. "even though they're only asking for 1/2 the money and have excellent credit that the mortgage company may not lend it to them if I'm over priced Yes. If the house's value, as determined by the appraisal, is less than the sale price, the bank will not finance the loan. Appraisals and the appraisal process have become much tighter since the Frannie and Freddie debacle. This fact is true regardless of amounts or credit history. Though this is happens somewhat rarely; typically if a seller and buyer agree to a price, this price is a reasonable value -- after all, that is nearly the definition of ""market value"". So, yes, it is true (and always true, for any financed purchase), but that shouldn't really affect your decision. If you try to sell for more than the appraisal, you will just lower the price to the appraised amount."
If you can qualify for two mortgages, this is certainly possible.  For this you can talk to a banker. However, most people do not qualify for two mortgages so they go a different route.  They make offers on a new home with a contingency to sell the existing home.  A good Realtor will walk you through this and any possible side effects. Keep in mind that the more contingencies in an offer the less attractive that offer is to sellers.  This is how cash buyers can get a better deal (no contingencies and a very fast close).  Given the hotness of your market a seller might reject your offer as opposed to first time home buyer that does not need to sell an old home.  On the other hand, they may see your contingency as low risk as the market is so hot.   This is why you probably need a really good agent.  They can frame the contingency in a very positive light. One way to think of net worth is to think if you sold everything you owned, how big of a pile of money would be standing next to you (assuming your net worth is positive). If you started with $100K and then bought a house worth $100K you would have $0 in the bank and a house.   If you sold that house for $100K you would pay the realtor 6% (typically) or $6K leaving you with $94K.    This means the act of buying your house has reduced your net worth by $6K. I asked a related question about how to value your home in your net worth. If you're looking for some formula, I don't think one exists. People talk about this all the time and give conflicting advice. If there was a proven-accurate formula, they wouldn't be debating it. There are basically 3 reasons to do a home improvement project: (a) Correct a problem so that you prevent on-going damage to your home. For example, have a leaking roof patched or replaced, or exterminate termites. Such a job is worthwhile if the cost of fixing the problem is less than the cost of future damage. In the case of my termite and leaking roof examples, this is almost always worth doing. Lesser maintenance problems might be more debatable. Similarly, some improvements may reduce expenses. Like replacing an old furnace with a newer model may cut your heating bills. Here the question is: how long does it take to repay the investment, compared to other things you might invest your money in. Just to make up numbers: Suppose you find that a new furnace will save you $500 per year. If the new furnace costs $2000, then it will take 4 years to pay for itself. I'd consider that a good investment. If that same $2000 furnace will only cut your heating bills by $100 per year, then it will take 20 years to pay for itself. You'd probably be better off putting the $2000 into the stock market and using the gains to help pay your heating bill. (b) Increase the resale value of your home. If you are paying someone else to do the work, the harsh reality here is: Almost no job will increase the resale value by more than the cost of getting the job done. I've seen many articles over the years citing studies on this. I think most conclude that kitchen remodeling comes closet to paying for itself, and bathrooms come next. New windows are also up there. I don't have studies to prove this, but my guesses would be: Replacing something that is basically nice with a different style will rarely pay for itself. Like, replacing oak cabinets with cherry cabinets. Replacing something that is in terrible shape with something decent is more likely to pay back than replacing something decent with something beautiful. Like if you have an old iron bathtub that's rusting and falling apart, replacing it may pay off. If you have a 5-year-old bathtub that's in good shape but is not premium, top of the line, replacing it with a premium bathtub will probably do very little for resale value. If you can do a lot of the work yourself, the story changes. Many home improvement jobs don't require a lot of materials, but do require a lot of work. If you do the labor, you can often get the job done very cheaply, and it's likely that the increase in resale value will be more than what you spend. For example, most of my house has hardwood floors. Lots of people like pretty hardwood floors. I just restained the floors in two rooms. It cost me, I don't know, maybe $20 or $30 for stain and some brushes. I'm sure if I tried to sell the house tomorrow I'd get my twenty bucks back in higher sale value. Realtors often advise sellers to paint. Again, if you do it yourself, the cost of paint may be a hundred dollars, and it can increase the sale price of the house by thousands. Of course if you do the work yourself, you have to consider the value of your time. (c) To make your home more pleasant to live in. This is totally subjective. You have to make the decision on the same basis that you decide whether anything that is not essential to survival is worth buying. To some people, a bottle of fancy imported wine is worth thousands, even millions, of dollars. Others can't tell the difference between a $10,000 wine and a $15 wine.  The thing to ask yourself is, How important is this home improvement to me, compared to other things I could do with the money? Like, suppose you're considering spending $20,000 remodeling your kitchen. What else could you do with $20,000? You could buy a car, go on an elaborate vacation, eat out several times a week for years, retire a little earlier, etc. No one can tell you how much something is worth to you. Any given home improvement may involve a combination of these factors. Like say you're considering that $20,000 kitchen remodeling. Say you somehow find out that this will increase the resale value by $15,000. If the only reason you were considering it was to increase resale value, then it's not worth it -- you'd lose $5,000. But if you also want the nicer kitchen, then it is fair to say, Okay, it will cost me $20,000, but ultimately I'll get $15,000 of that back. So in the long run it will only cost me $5,000. Is having a nicer kitchen worth $5,000 to me? Note, by the way, that resale value only matters if and when you sell the house. If you expect to stay in this house for 20 years, any improvements done are VERY long-term investments. If you live in it until you die, the resale value may matter to your heirs. There is some element of truth to what your realtor said.  The seller takes the house off the market after the offer is accepted but the contract is contingent upon, among other things, buyer securing the financing. A lower down payment can mean a higher chance of failing that. The buyer might be going through FHA, VA or other programs that have additional restrictions. If the buyer fails to secure a financing, that's weeks and months lost to the seller. In a seller's market, this can be an important factor in how your bid is perceived by the seller. Sometimes it even helps to disclose your credit score, for the same reason. Of course for your situation you will have to assess whether this is the case. Certainly do not let your realtor push you around to do things you are not comfortable with. Edit:  A higher down payment also helps in the situation where the house appraisal does not fare well.  As @Dilip Sarwate has pointed out, the particular area you are interested in is probably a seller's market, thus giving sellers more leverage in picking bids. All else equal, if you are the seller with multiple offers coming in at similar price level, would you pick the one with 20% down or 5% down? While it is true that realtors have their own motives to push through a deal as quickly as possible, the sellers can also be in the same boat. One less mortgage payment is not trivial to many. It's a complicated issue, as every party involved have different interests. Again, do your own due diligence, be educated, and make informed decisions. Are you emailing him constantly or just sending over a question here and there?   Asking because there's a point where advice isn't free and if you aren't paying him to answer extra emails and phone calls, he's not likely to answer them. Also, he probably has a lot of clients so it can be hard to keep up if you get lots of emails from a client. If possible, ask all of your questions in one email. There are several factors that can help you make a decision.  How friendly are the laws to tenants as opposed to landlords?  How easy will it be for you to collect rent?  How much management is needed?  Do you desire to own rental properties?  What does your schedule look like? Based upon pure numbers I would keep this property.  It looks like you can earn 3K per year, which you may have done some math wrong, on about a 15,000 per year investment.  About 20%, very good.  Even if you only collect half your profits due to maintenance or missed rent checks the numbers still look really good. If you don't need the extra funds, you can always pay more on the mortgage.  The other thing to consider is the rest of your fiances.  Can you cover a couple of months of missed rent?  Do you have an emergency fund?  Do you have other debts? I see your remarks regarding Zillow, but would add a question. Why not look only for recent sales? If you find homes similar to yours with recent sales, that's similar to how the appraisers do it. I've refinanced many times and each time, I looked at sales within three miles of my house. I hit the appraised price very close in my estimate, high or low compared to Zillow, but used transaction data from there.just my thought.  I chose a random neighborhood, and this was the first house I clicked. The main view shows last sale date, so I'd obviously suggest the OP look for more recent ones. If turnover is that low in his neighborhood, I understand, but the comment that transactions aren't listed is factually incorrect. I'd like my 2pts back. :) I'm not sure about your first two options.  But given your situation, a variant of option three seems possible.   That way you don't have to throw away your appraisal, although it's possible that you'll need to get some kind of addendum related to the repairs.   You also don't have your liquid money tied up long term.  You just need to float it for a month or two while the repairs are being done.  The bank should be able to preapprove you for the loan.   Note that you might be better off without the loan.  You'll have to pay interest on the loan and there's extra red tape.   I'd just prefer not to tie up so much money in this property.   I don't understand this.  With a loan, you are even more tied up.  Anything you do, you have to work with the bank.  Sure, you have $80k more cash available with the loan, but it doesn't sound like you need it.  With the loan, the bank makes the profit.  If you buy in cash, you lose your interest from the cash, but you save paying the interest on the loan.  In general, the interest rate on the loan will be higher than the return on the cash equivalent.   A fourth option would be to pay the $15k up front as earnest money.  The seller does the repairs through your chosen contractor.  You pay the remaining $12.5k for the downpayment and buy the house with the loan.  This is a more complicated purchase contract though, so cash might be a better option.   You can easily evaluate the difficulty of the second option.  Call a different bank and ask.  If you explain the situation, they'll let you know if they can use the existing appraisal or not.  Also consider asking the appraiser if there are specific banks that will accept the appraisal.  That might be quicker than randomly choosing banks.   It may be that your current bank just isn't used to investment properties.  Requiring the previous owner to do repairs prior to sale is very common in residential properties.  It sounds like the loan officer is trying to use the rules for residential for your investment purchase.  A different bank may be more inclined to work with you for your actual purchase.