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Positive Home Appraisal and Roof Repair Requests

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One of the concerns when we “won” the house for $295k, when it was listed very low at $270k, was that the home would appraise at under the purchase price. In the event that you purchase a home and it is appraised for under the purchase price, the buyer must come up with the difference. The reason is if you were to default on the loan, the lender will forecloses on the home and sell it. If the home is worth less than the loan it will sell for less than the amount of the loan and the bank loses money, that’s why you have to make up the difference in cold hard cash. Luckily for me, the house was appraised at $299k so the nightmare scenario of an under-appraisal didn’t materialize.
In Search of a Home
I called up my mortgage consultant (lender), Nick, to ensure that everything was progressing smoothly and that he needed all the information required of me. I was pretty sure he would’ve called me if there was anything he needed but it is better to be safe than sorry. He assured me that everything was on track and we are going to meet the deadline of closing next Friday (May 27th). This was also when he told me about the appraised value of my new (to me!) home.

As for the roof concerns, after faxing the request off to the seller agent, we received signed confirmation that the sellers (who have been accommodating and extremely polite the one time I met them) agreed to the request. A roofer will begin the repairs on Monday, May 23rd, and we will have a final walkthrough on Thursday, May 26th, a day before closing. While I am concerned that we didn’t spell out specifically what needed repair, the roofer must give us a certification (I will have to research what that means exactly) after the work is complete.

Finally, I have to look into the logistics of how the rent back will work and getting home owner’s insurance. The rent back agreement is that they’d cover my mortgage, taxes, and insurance so I have to double check what will come out of my pocket.

So close…

{ 4 comments, please add your thoughts now! }

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4 Responses to “Positive Home Appraisal and Roof Repair Requests”

  1. Jeff Running says:

    I have found that appraisals made after a price has been set for a property seem to be a few thousand dollars more than the price. It’s almost as if the appraiser is attempting to provide the paperwork that the buyer and lender need. It would be interesting to hire an appraiser that has no knowledge of the set price. I’m assuming the final appraisal would be quite different. After the close I received a copy of the appraisal report which includes samples of other similar homes to provide a reference point. Each home had a series of data points (square footage, acres, upkeep) that were assigned points. The points were then used to derive the appraisal price. It seemed like the appraiser had a lot of room to adjust the price to meet the lenders needs.

  2. jim says:

    I don’t know if the appraiser knew about the set price (I’m inclined to think he did) but what motivation would he have to appraise it higher? I already signed a low-appraisal waiver (stating I’d pay the difference) and I would’ve had to assets to cover the different – so the lender wouldn’t have taken any risk if the appraisal were lower. While I don’t doubt your experience Jeff, I don’t see why the appraiser would side with me over the lender.

  3. Jeff Running says:

    Here’s a CNN/Money article on inflated appraisals.

    Appraisal fraud: your home at risk

  4. jim says:

    Yeah Jeff I saw that article, it made me think about the over appraisal too. While I don’t think that it happened (everyone I’ve talked to who has looked for a house expected my home to be over $300k given the characteristics) but it is a possibility.

    However, I didn’t decide to pay that price based on the home appraisal – it was based on a month of searching (which isn’t a long time by any means) and understanding the local market conditions. I will be living there for several years so I don’t think this will be a problem for me. 3/1 ARM folks might need to be wary though.

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