I recently attended a team meeting where we learned more about the various appraisal options. My first thought was, wait, we have options?! I was under the impression if you were using bank lending that you always HAD to have a traditional appraisal done, BUT that is NOT true. Let’s dive in and talk about that.
So, as we do, let’s talk Real Estate, let’s talk APPRAISAL SCENARIOS…
So for the most part the process typically goes:
Bank Pre-Approval to figure out your purchasing power
Reach out to a Realtor
Search for Homes
Find your dream home – woo!
Submit an offer
Offer is accepted- yay!
Home Inspection & Loan Underwriting Process Begin!
APPRAISAL TIME (let’s say it comes back at or above value – woo!)
WHAT I WANT TO FOCUS ON IN THIS PROCESS IS THE APPRAISAL
Now, what many might not realize is that an appraisal can truly make or break a deal. I (we) have personally dealt with this the hard way TWO TIMES in the past year. I’ll share one of those stories with you real quick.
We found a rental property up in Binghamton that we were so excited about. This property was a bit more expensive than any other property we had purchased up there but it appeared to be in good shape and CASH FLOWED BEAUTIFULLY. We had decided to go the traditional financing route and finance ~75% of the purchase price, since this property was on the higher end of our budget. Everything was going great, the current owner had taken care of the property, the inspection came back great, we had renters in there through the next 15 months BUT the appraisal came in $40,000 BELOW the agreed upon purchase price. I would never suggest anyone to purchase a home that came in under value, especially when $40,000 was roughly 26% of the property value. Remember now the bank would only finance 75% of the appraised value or purchase price, whichever is lower, so that meant that we would have had to come up with that additional $40,000 to close the deal ON TOP OF the 25% down payment AND closing costs. Ultimately, we could not and did not want to buy a house that appraised that low, and we had to walk away from the deal. That appraisal TOTALLY KILLED that deal.
NOW WHAT I RECENTLY LEARNED IS THAT APPRAISALS ARE NOT ALWAYS NECESSARY WHEN DOING TRADITIONAL FINANCING. SO LET’S TALK ABOUT YOUR OPTIONS.
The Appraisal Waiver
Buyers who are putting 20% down, and have good credit history can request an appraisal waiver which means that there is essentially no appraisal necessary and this saves the buyer ~$500 off the bat.
In some cases, a lender might let you elect to have an easy evaluation. In this scenario, a field agent will go out to the property and takes pictures to submit to the bank / lender. The lender can then decide if a further appraisal is needed, based on those photos. If the lender decides they do want a legit appraisal, the lender will forward these photos to an appraisal company and request a write up. The total cost of this entire process is ~$300. The field agent photos are ~$150 and the additional write up (if required) is another ~$150. So all in all the buyer will have pay $300 total vs the $500 of a normal appraisal fee.
This seems to be the norm. We have seen appraisals cost anywhere from $425-$600.
NOW THIS ALL BEING SAID, I CANNOT ENCOURAGE YOU TO GO ONE ROUTE OR THE OTHER. ALL OF THS IS UP TO YOU, THE LENDER, AND DEPENDS ON THE SPECIFIC DEAL, BUT THESE ARE OPTIONS THAT YOU MAY HAVE SO IT IS GOOD TO KNOW THAT THEY EXIST.
HAVE YOU EVER PERSONALLY HAD AN APPRAISAL WAIVED? OR DONE AN EASY EVALUATION?! TELL US ABOUT IT!
Feel free to comment on the blog post HERE and let us know what YOU think!
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#teamgogo Team Meeting