What First-Time Homebuyers Should Know About Appraisals
There are several misconceptions to avoid when considering your appraisal options, the first and most important one is that an appraisal is NOT as complete or in-depth as a home inspection.
Don’t count on the appraisal to tell you anything crucial about certain aspects of the property such as the remaining life of the roof or how long before you might need to replace a water heater in the home. Or whether the foundation has issues, etc.
But there are other misconceptions. Some want to refuse payment to the appraiser if they don’t agree with the result. But doing so is like refusing to pay your dentist because they discovered you have a cavity. The money paid is for services rendered, not the outcome of those services.
Appraisals cost money and it’s usually the borrower who pays. You should consider the appraisal as a typical cost of doing business with a lender to buy your home.
One thing about appraisals; the cost is not standardized nationwide and your costs may vary depending on where you are buying. In general you should try to save about $400 but it’s wise to ask your lender what specific amount is customary in your housing market.
And there’s another appraisal-related issue--compliance inspections. If your appraisal requires corrections to repairs to be made as a condition of loan approval, you may be required to pay for an additional compliance inspection (which is also a typical cost of doing business where required).
It is a good idea to anticipate this possible expense and save for it. Here is another situation where the loan officer or even a real estate agent may be able to help you in terms of customary pricing for the service.
The appraisal is something that generally tells the lender two things--that the home meets minimum requirements (emphasis on minimum) and what the fair market value of the property is. The valuation aspect of this is key because that value helps the lender determine your loan amount.
In cases where the home appraises at a value lower than the asking price the buyer can choose to walk away from the transaction without a penalty. Or choose to proceed with the loan. But in those cases the buyer is required to pay the difference in cash between the appraised value and the asking price. That amount cannot be financed.
Of course, you can always negotiate with the seller to reprice the home assuming the seller is willing to do so. Don’t hesitate to renegotiate the price of the home--the appraised value of the home is an important number and the seller may realize the current price is going to make it difficult to interest a buyer.
What You Need to Know About the Appraisal Fee
The Appraisal is an Important Requirement
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