I’ve been having more discussions than usual with my clients about when to order the appraisal.
Usually, once the lender orders the appraisal, you need to pay for it, somewhere around $350-$400. That’s only fair, if the person does the work, they get paid for it, whether or not you buy the house.
A couple years ago, we wouldn’t order an appraisal until we were through inspections and repair negotiations - no sense in incurring the appraisal charge until we know if the house is in good shape and we know you’re going to buy it.
In today’s real estate market, however, sometimes appraisals are coming back marked as a declining market, which means you may have to pony up additional down payment. This is something we might want to know sooner rather than later.
More often than not, my clients are deciding to have the appraisal done during their inspection period. Yes, the incur that cost without having gone through repair negotiations, but at least they know sooner if the appraisal will come in fine or if it will cause problems.
Just like the cost of inspections, it’s what you pay as a home buyer, basically as risk mitigation. Better to pay a bit up front and find out for sure if the property is sound and that you can get appropriate financing, then not pay those things and end up with a lemon.
May 8th, 2008 at 10:06 am
Kelly - What about the contingency in the contract (Sec. 2c, Ln. 59-61) that the appraisal must come back at the sales price or higher? Doesn’t this protect your buyer enough and allow them to cancel the contract after the inspection period?
May 8th, 2008 at 11:17 am
There are several contingencies such as that one that protect the buyer. Its more a matter of timing I’m addressing - if we wait until we’re thru inspections, we might just be delaying the inevitable, especially if more down payment will be required and the buyers don’t have it. Just a discussion item to have with my buyers.
May 8th, 2008 at 5:21 pm
Gotcha!!
May 10th, 2008 at 6:29 pm
Interesting article. I have never experienced an overpriced home based on the appraisal. Do you typically work in the luxury market?
May 11th, 2008 at 8:33 pm
MLS (if that is your real name… :P) - I work all price ranges. I think in 5 years, I’ve had one appraisal not come in at the sales price with one of my buyers. The problem is if the market is determined to be ‘declining’, then the lender may require additional down payment.
May 12th, 2008 at 11:22 am
Kelley,
Thanks for the post! Think it is Great!
This post points out time and efforts savings! The issue of real estate sales professionals and home buyers/sellers using an appraisal for listing or purchase, while not always received, was in fact a key reason for the development of company. Special appraisal products are offered to those parties in efforts to speed up the transaction and counter other issues that may arise from a sale/purchase.
People are really surprised how fast a closing can go with a lot of the inspection/appraisal work done up front in some form or other.
Thanks for putting this out there.