What Does an Appraiser Do?

appraiser

By: Angela Colley

When you’re considering buying a house, there are two sides to the story: the seller’s asking price and the actual value of the property. This is where an appraiser steps in.

What is the job of an appraiser?

An appraiser’s job is to determine the current value of a property. Most of the work is done on-site where the appraiser will:

  • Conduct a room-by-room walk-through to determine interior condition.
  • Walk the length of the property to determine exterior condition.
  • Evaluate any amenities such as a swimming pool, finished basement, or built-in bar.
  • Note any health or safety code violations.
  • Record the layout of the property.

Off-site, the appraiser may also evaluate the current real estate market in the neighborhood to help determine the value of the property.

How do you know if an appraiser is qualified?

Typically, your lender will choose an appraiser. The appraiser should be state-licensed or have other certification. If the appraiser is a member of a professional organization such as the Appraisal Foundation, he or she most likely will adhere to certain ethics codes and rules of conduct. However, not all states require certification, so do some research before you start.

Who hires the appraiser?

Usually, the lender or financing organization will hire the appraiser. Because it’s in the best interest for the lender to get a good appraisal, the lender will have a list of reputable appraisers whom they have hired in the past.

Who pays?

The loan agreement normally contains a set value for the appraisal of property. Whoever takes out the loan pays for the appraisal, unless the contract specifies otherwise. Then the buyer pays the fee in the closing costs. If a seller is motivated, he may pay for the appraisal himself to back his asking price, which benefits the buyer by reducing closing costs.

The lender may not adjust the fee after hiring the appraiser. Expect an average range of $300 to $600 depending on the size, property value, and location. Different appraisal report types take various amounts of effort, which may affect the price.

How long does it take?

One or two hours is the average time spent for most appraisals of property. You should most likely receive the report in three to seven business days on average. The amount of time it takes can depend on the type of report, size of property, and other factors.

What are the benefits?

Think of the appraisal as an investment of your time, money, and effort. It is important to know what your house is worth, and it will help you get your loan approval. Hopefully, this step and the rest of the house-buying process will go smoothly.

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My Offer Was Accepted—Now What?

offer accepted

By: Craig Donofrio

Having your offer accepted feels great—but for most home buyers, it’s just the beginning. There is still a lot more to be done before you’re over the front threshold. Here’s a rundown of what comes next.

1. Apply for a loan

Unless you’re paying in cash, you’ll need to apply for a mortgage loan (if you’re already pre-approved, good for you). If you’re not pre-approved, meet with at least two or three lenders and compare their loan options. Be prepared to ask questions, and be completely open with the lenders about your finances.

2. Home appraisal and inspection

The next step is getting your home appraised and inspected.

Your lender will require your house be appraised by a professional, who is usually provided by the lender. The appraisal gives you a detailed report on the value of the home. If the home’s appraised value is less than the purchase price, you will need to either make a greater down payment or negotiate with the seller to lower the price. A lender won’t give you a loan for more than the appraised value.

A home inspection tells you if the home has any issues. Inspections aren’t always required, but you should absolutely get one even if you’re not getting a loan. Go over the inspection report in detail with the inspector to make sure you’re familiar with any problems, their severity, and the estimated cost to fix them. Additionally, you may also want to get your home checked for radon and pests, which are additional costs.

If the inspector finds problems, you may be able to get the seller to pay for necessary repairs or lower the price to adjust for the cost.

3. Get your funds ready

Make sure the funds you need for closing and in reserves are both accessible. If you need to pull money from an investment, do it right away. Keep the paperwork for the transaction to show your lender you liquidated funds to get your down payment.

4. Find homeowners insurance

In most cases, buyers are expected to pay for homeowners insurance upfront, before closing. Depending on where you live, you might need extra insurance, like flood coverage. Shop around at several different insurance companies for the best rate. Your lender will need proof of insurance before approving your mortgage. 

5. Final walk-through

You will be allowed to do a final walk-through of your new home 48 hours before closing.

This allows you to make sure any items that should be there, as per your contract, remain. It also lets you check the condition of the home to make sure no extra damages have occurred. If you find anything different from what you agreed upon, you may postpone the closing to give the seller time to fix the problem.

It’s important that you catch every issue during the final walk-through. If you spot them after closing, they’re going to be your problem.

6. Closing

This is the day when you sign the mortgage documents and officially gain ownership of the property. Most likely your Realtor® will be there, as well as the seller, the seller’s Realtor, the closing officer, and perhaps the mortgage broker.

You will need to bring ID and a cashier’s check to pay closing costs, which you will know in advance (and if they look different, don’t be afraid to walk away). Your spouse will also need photo ID. (In some states, spouses are required to attend and sign papers even if they aren’t on the mortgage.) Check with your Realtor about the details of your closing.

Updated from an earlier version by Laura Sherman

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10 Home-Buying Costs You Need to Know About

home finance

By: Craig Donofrio

If you’re a first-time home buyer, you might get a little queasy when the last line of your good-faith estimate comes in at several thousand dollars. And after the color returns to your face, you might also be a little more than perplexed by some of those fees.

Knowing what you’re paying for—like these 10 common costs—can ease that check-writing pain.

1. Earnest money

To prove you’re “earnest” in your purchase commitment, expect to plunk down 1% to 2% of the total purchase price as an earnest money deposit. This amount can change depending on market factors. If demand in your area is high, a seller could expect a larger deposit. If the market is cold, a seller could be happy with less than 1%.

Other governing factors like state limitations and rules can cap how much earnest money a seller can ask for.

2. Escrow account

An escrow account is basically a way for your mortgage company to make sure you have enough money to cover related taxes and mortgage insurance. The amount you need to pay varies by location, lender, and loan type. It could cover costs for a few months to a year.

Escrow accounts are common for loans with less than a 20% down payment and mandatory for FHA loans, but it’s not required for VA loans.

3. Origination

The origination fee is a hefty one. It’s the price you pay the loan officer or broker for completing the loan, and it includes underwriting, originating, and processing costs.

The origination fee is a small percentage of the total loan. A typical origination fee is about 1%, but it can vary. Use your good-faith estimate to shop around.

4. Inspection

You want to be assured your new home is structurally sound and free of surprises such as leaks or pests living in the walls. Those assurances come with a price.

  • Home inspection: This is critical for home buyers. A good inspector will be able to notify you of structural problems, flooding issues, and other potentially serious problems. Expect to pay $300 to $500 for a home inspection, although cost varies by location.
  • Radon inspection: An EPA-recommended step, this inspection will determine whether your prospective home has elevated levels of the cancer-causing agent radon. A professional radon inspection can cost several hundred dollars.
  • Pest inspections: Roaches are one thing. Termites are a whole different story. Expect to pay up to $150 for a termite inspection.

5. Attorney

Some states, such as Georgia, require an attorney to be present at closing. In some other areas, this is optional. If you use a lawyer, expect to cover the costs, which vary by area and lawyer.

It’s typical for mortgage companies to have a lawyer on their end, although they should cover the bill.

6. Credit check

Just because you can get your credit report for free doesn’t mean your lender can (and it will actually pull all three). You have to reimburse the lender, usually around $30.

7. Extra insurance

If you live in a hazard-prone area, you might need to purchase extra insurance, like for flood.

8. Appraisal

Your lender won’t loan you money for a home without knowing what its fair market value is. An appraisal will cost $200 to $400, depending on location and property size.

9. Title company

You pay this to the title company to make sure the property’s title is free and clear. Your lender will recommend a title company, but you can also shop around for one.

10. Survey

It’s not required in all instances, but your lender may require a professional surveyor to determine exactly where your property lines are drawn. Prices vary widely, but expect to pay at least $100.

Remember: You have bargaining power. Shop around to get a feel for what rates and fees apply in your area. If you aren’t sure what a lender is charging, ask for an explanation—the charge might not be set in stone. If you’re unhappy with a charge, negotiate.

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