For purchase home loans, don’t pay for the appraisal too soon during the mortgage loan process. You may lose leverage in your negotiations with the seller if the Appraiser schedules their visit during your negotiations.
The trigger point in the home appraisal process is you paying for the appraisal. The process doesn’t move forward until you pay for the appraisal.
We, the lender, technically order the appraisal using a third-party company called an Appraisal Management Company (AMC). The AMC then sends you a link for advanced payment of the appraisal. After you pay for the appraisal, the AMC assigns the order to an Appraiser. At that time the Appraiser schedules an appointment to inspect the property. The seller is then notified of the appointment. The Appraiser typically sets the appointment within 48 hours after the appraisal is assigned.
The process doesn’t move forward until you pay for the appraisal.
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An appraisal costs you between $500 to $750 and is non-refundable money spent. A seller may suspect that you are committed to buying the house, regardless of the outcome, once an appraisal is scheduled. Therefore, we recommend you don’t pay for the appraisal too soon while you’re negotiating with a seller.
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When to pay for the appraisal
After you execute a purchase contract you should immediately order a home inspection. (This isn’t mandatory but it’s highly recommended). You will then be sent a report after the home inspection is completed. Depending on the inspection’s findings, you may want to reach out to the seller to negotiate the contract.
It’s perfectly acceptable for us to order the appraisal after your sign and return the lender disclosures. Remember, nothing becomes official until you PAY for the appraisal.
For example: A home inspection may reveal that the roof is questionable, the HVAC system is on its last leg, and that a major appliance doesn’t work properly. You may want to request seller concessions and/or lower the purchase price as a consolation. These re-negotiations could take a few days.
Now imagine if an appraisal appointment is set during that negotiation period. The seller may assume that you’re committed to buying the home regardless of the outcome of these request. The seller may then deny some, or even all, of your proposals.
Don’t Delay: You May Miss Closing
The entire premise of not paying for the appraisal too early is operating under the assumption that there’s plenty of time before closing. A general rule of thumb is that you want the appraisal to be completed two weeks before your closing date.
This means you typically need to order the appraisal about three weeks before closing since appraisal turn times are generally about a week. You need to allow enough time for the home appraisal process, processing, underwriting, clearing condition, and sending docs to title. The mortgage loan process works in a series which means we can’t skip steps. We need the appraisal in order to clear all conditions and move forward with the home loan.
Consult the professionals
We certainly advocate that you don’t pay for the appraisal too soon; however, we want to ensure you have a smooth and on-time closing. The window for paying the appraisal is very small. Please keep us posted on the results of the home inspection and any negotiations.
We’ll provide counsel and work with the AMC to estimate appraisal turn times. Worst case you may be subjected to paying for a rush. The appraisal costs for a rush fee ranges from $100 to $200 and may be necessary if time gets crunched.
Mark and the team can walk you through the entire home loan process and mortgage loan process. Call us with any questions and let us know how we can help.
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Other Appraisal Related Articles
- AMCs: cost and impact on the appraisal process
- Appraisals requirements for various loan programs
- Types of appraisals and how to choose
- Appraisal reviews and second appraisals
- Appraisal waivers – because appraisals are not always required
- How is square footage measured