Home Valuation Crucial to Closing Process

By Dian Hymer

Before lenders will loan on a property, they usually want an appraisal report to assure them that the property is worth what the buyer is offering to pay for it. The backlog in the appraisal industry, due to record-low interest rates and high refinance demand, is making it difficult for buyers to close on their new homes quickly.

Be realistic about the time it is likely to take to have an appraisal done. If you're making an offer, allow at least a couple of weeks for your appraisal contingency. In some areas, this might not be enough time. Ask your mortgage broker or loan agent for guidance.

Lenders and appraisers give higher priority to purchase mortgages over refinance mortgages. This means that if you're buying a home, you'll be able to get an appraisal done more quickly than someone who's refinancing. Some homeowners who refinanced recently complained that it took six weeks to get an appraisal.

It's possible to pay extra for a rush appraisal, if you have an urgent need to move the process along more quickly. Discuss this with your mortgage broker or loan agent when you submit your loan application.

These days, most appraisers are over-worked and short on time. There are things you can do to make their job easier. This will help them get your appraisal done faster.

House Hunting Tip: Make sure the property is looking its best when the appraiser visits. Treat the appraiser's visit just as you would a showing to a prospective buyer. Appraisers are impressed by how well a property shows. Homes that are staged for sale should be kept that way until the appraiser comes through.

Home buyers should ask their real estate agent to be willing to meet the appraiser on short notice. The quicker the appraiser gets into the property, the sooner your appraisal report will be completed.

Ask your agent to bring comparable sales information. If you're refinancing and have a local real estate agent, ask him or her to provide you with comparable sales information if you think there will be any difficulty appraising the property for the amount you need to complete the refinance.

Appraisers need to take measurements. The square footage of the building and the land affect the appraised value. Some houses are easier to measure than others. If you have a copy of building plans for your home, make them available to the appraiser. This will save the appraiser time, particularly if the home is large or has a complicated floor plan.

Most buyers include an appraisal contingency in the purchase contract that makes the purchase contingent on the property appraising for the purchase price. If the property appraises for less than the purchase price, the buyer may not want to, or be able to, proceed with the purchase.

In fast-paced real estate markets where multiple offers are common, buyers often waive contract contingencies to make their offers more attractive to the sellers. Before you waive an appraisal contingency, make sure you understand the risks involved. If the property appraises low, you could have to put more cash down. If you decide to back out of the deal, you could lose your deposit.

Buyers often prefer to wait to order the appraisal until the inspection contingency has been removed. This way they avoid paying an appraisal fee if they decide to withdraw from the purchase because of problems revealed during inspections.

The Closing: In today's backlogged lending environment, however, the appraisal needs to be ordered soon after the seller accepts your offer to have any hope of closing in 30-days or so.

« Previous