Timing the Appraisal

May 8, 2008 | By Kelley Koehler | Filed Under Home Buying, Loans and Financing

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.

tags: appraisal, real estate, tucson

Comments

10 Responses to “Timing the Appraisal”

Steve Nicks on May 8th, 2008 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?
Kelley Koehler on May 8th, 2008 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.
Steve Nicks on May 8th, 2008 5:21 pm

Gotcha!!
MLS on May 10th, 2008 6:29 pm

Interesting article. I have never experienced an overpriced home based on the appraisal. Do you typically work in the luxury market?
Kelley Koehler on May 11th, 2008 8:33 pm

MLS (if that is your real name… ) – 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.
Apella on May 12th, 2008 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.
Brent M on November 17th, 2008 1:45 pm

Nice info – thank you.
What happens if – in the course of loan shopping (acquiring GFE’s) – a broker orders an appraisal for me that I didn’t commit to in writing or verbally? I end up with a diffrerent lender and now the orginal broker tries to loop in the cost of the unauthorized appraisal into my closing costs.

Isn’t an appraisal specifically ordered by me, not a broker/lender (unless agreed)?

Is it legal for a broker to attempt to horn in on my closing for an unauthorized appraisal?

What can I do if they attempt this? What is Escrow’s responsibility?

Thanks!
— b
Kelley Koehler on November 17th, 2008 1:54 pm

Brent – this would be a better question for your agent, and I don’t know the rules in your particular part of the country. Here, based on our typical resale contract, the lender orders the appraisal. It does not belong to you the buyer, you do not order it. You just pay for it, the lender passes that charge along to you. And no one would order an appraisal without having a property under contract, which would mean the lender was given a copy of the contract. If more than one lender was given a copy of your contract as you shopped loans…

Here, as well, escrow is a neutral third party. They don’t make decisions, they follow instructions and ensure compliance.
Brent M on November 17th, 2008 2:14 pm

Thank you Kelley!
Can escrow follow instructions for more than one lender?
— brent (Hawai’i)
Kelley Koehler on November 17th, 2008 4:07 pm

Brent – you’d have to go back to the escrow instructions on that one. I can’t speak to your contract or how they operate in your state.

Got something to say?

Plan for Widening Grant Road

Infuriating A Lender

Subscribe in a reader

Search this Site

Got A Question? Ask!

Other Information That Might Be Helpful

Negotiating Repairs (February 16, 2009)
Having a couple of buyers in the throes of repair requests reminds me the topic deserves a review.
When you buy a home in Tucson and use the customary purchase contract, you’re allowed an inspection period. By default, you get 10 days, but I usually like to write in 15 days. Regardless of duration, at [...]
Who The Appraiser Works For (July 8, 2008)
Two people found this blog today by searching for appraisal related terms. One person was searching for “neutral appraiser” and the other was “buyer request independent appraiser.”
I’m a little curious what that second situation might be.
But regardless, let’s talk about appraisers.
If you’re getting a home loan, and the lender orders an appraisal, then the lender [...]
TEP Temporary Power Program (December 3, 2009)

Tucson Electric Power (TEP) and the City of Tucson Planning and Development Services Department are rolling out a new temporary power program for distressed properties.
If you’ve ever been shopping for a distressed home, you’ll know that often the utilities are off. Sometimes, utilities are turned on if an offer is accepted and sometimes the owner [...]