Unless you plan on buying a home in CASH and just love it to death. More than likely you are getting a loan. It does not matter if you are getting a first time home buyer loan or a loan for investment property. You will have to get an appraisal, there is no whats or buts. Normally this is the cost that the buyer will have to bear, and if it has been some time since you have bought a home lets say in the last 3-5 years you will find that the appraisals are a bit more expensive now. Usually you can look to paying somewhere between $450.00 – $500.00 for an appraisal.
But anyways you will have to get an appraisal, part of getting an appraisal is really for your protection as well as the bank. The appraiser will not only write up a report on what they think the value of the home you are planning to buy but also to see that there are no safety issues with the home. For example that it is up to code and the roof is not falling apart, and in California that there is a working smoke detector as well as a carbon monoxide detector.
So lets say the home is for sale for $300k but the appraisal comes in at $280k. The a couple of things has to happen. Because even though you may be approved for a $300k loan the bank will only lend up to the appraised value. So that means if you really want the house you will have to put up an additional $20k along with the down payment you were already going to put down.
Or your agent will send in usually an addendum to reduce the home to the appraised value. This does not mean that it will automatically be reduced the seller will still have to agree to it. The seller can say no way this is what I want and put back on the market if you do not agree to it. Or you can go back to negotiations maybe meet halfway.
Something to just to keep in mind that if you were getting a FHA loan that the value on that home sticks with for 120 days or 4 months basically. Does not matter what bank you go to when you get an FHA loan it is assigned a case number. Now if you were getting a conventional and you really think the house is worth more you can try a different lender. If you were using a broker he will just try a different source if you were using a bank you may have to start the process all over again at a different bank. The file does not carry over when doing a conventional loan.
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