Shut the front door. Your offer was approved! Cue your best Katy Perry “Roar” karaoke performance, right?! Wrong–or not just yet. You’ve still got the appraisal and the inspection to ace before you can belt out the chorus to your favorite anthem.
Ace the appraisal
Typically–unless you’re independently wealthy, and wouldn’t that be fabulous–three parties have to agree on the sale price of a home: The buyer, the seller and the lender. And since the lender’s got a lot of skin in the game, they’ll want to make sure your home is actually worth what you’re paying for it–which is the reason for an appraisal.
An appraisal is performed by a third party on behalf of the buyer and lender to determine that the purchase price of the house can be supported by other closed sales in the market so that the lender can feel secure that their loan will be properly collateralized.
The appraisal process is actually in place for the protection of you, the buyer. And because the appraiser works for you and the lender, you can rest assured that the evaluation of the property will yield an unbiased report for both parties. A well-informed buyer is a happy buyer.
Once the appraisal is complete, the appraiser will prepare their assessment for the lender. You’ll also receive a full report from your mortgage company. If the appraisal is lower than the sale price agreed upon between the buyer and the seller, and a loan is involved, then the buyer and seller will have to figure out how to match the value established by the appraiser. That could mean the buyer putting more cash into the transaction, the seller agreeing to the appraised value as the sale price, or a compromise in between.
But if you and the seller fail to reach a middle ground on the sale price, you might consider taking a cue from everyone’s favorite frost-provoking heroine and ‘let it go.’ Be sure to consult with your Realtor before you make any decisions though!
Pass the inspection
If you’ve seen the classic 1980’s film “The Money Pit,” where a newly-married couple, Walter and Anna, purchase a house destined for demolition, you can appreciate the necessity of a home inspection. Had Walter and Anna hired an inspector, they would have been provided a complete picture of the home’s structural integrity, functionality and safety–preventing them from purchasing a real life money pit.
Lean on your Realtor to recommend an inspection agent–they know the best in the biz, and this is certainly not an area where you can afford to cut corners.
You’ll receive a full report of the inspector’s findings, but it’s a good idea to plan on attending the actual event. Think of the inspection as a learning opportunity for you as you get to know your soon-to-be house. This isn’t the time to be shy either; ask the inspector to explain any findings along the way.
Remember that houses need care and maintenance and are never perfect, so you can expect a repair list. But before you panic, understand that most repairs can easily be fixed and certainly aren’t deal breakers when it comes to the sale of the house. However, if your inspector stumbles onto something larger–say a mold problem or structural issue–like always, you have options:
You can ask the seller to repair, you can ask the seller to give you an allowance to repair after closing, or you can decide that you don’t want to continue with the purchase of the property. Typically, the seller is asked to make repairs and the buyer can have the house re-inspected before closing to insure that repairs are satisfactory.
And remember, it ain’t over ‘til it’s over, so if something comes up in the inspection that makes your stomach turn, don’t hesitate to ask questions.
Next up, we’ll tackle surviving the closing. Stick around, newbie, you’re almost a homeowner! If you missed the other articles in the series, catch up here.