House Hunting Saga Continues!

 Despite reservations to the contrary, it turns out our offer for the house was accepted! 

So what’s next? Appraisal week commences...

This week, we will find out what the appraisal prices the house at. In case you’re not familiar with this process, we are hoping the appraisal comes as close to our bid as possible. A home loan will only cover up to the cost of the appraisal so we would have to pay out the overage upfront. The baseline estimate for this one lies around $165K and our offer falls at $175K. If the appraisal is at $165K, we have to cover $10K upfront. Keep in mind, they also ask for a down payment (which, I believe, is about 3.8% of the total purchase price and also closing costs).

When starting a contract for an accepted offer, they ask that you pay earnest money, which is $500 in our case. This actually counts towards the purchase price, not an additional cost. This money is held as a sort of guarantee that you won’t back out of the contract without an acceptable reason. In most cases, if the seller hasn’t disclosed all of the issues that turn up during inspection or appraisal, you can chose to terminate and have the earnest money returned or renegotiate to ask them to lower the price or fix the issue prior to closing the sale. If you break out of the contract for softer reasons, like you found another house you want instead, then the realtor keeps the earnest money, a sort of penalty for wasting their time. I would assume there will be a delay in being able to repost the house to market as well as more costs to them to repost. Totally understandable to incentivize serious offers only.

So to avoid too many upfront costs, it is actually ideal for the appraisal to land as close to your offer as possible. In this case, the lowest possible appraisal estimate isn’t a huge leap that we can’t afford to meet. Although a higher appraisal price does mean higher payments, the difference in monthly costs is almost negligible in a $10K margin. We’d much rather pay a little more monthly than have to put out the larger amount right away. I might have said before, but this house is so well-kept, needing almost no work to accommodate our needs, so it is very likely the appraisal will indeed land closer to our offer.

At this point, I am not 100% on how closing costs are calculated since the realtor typically walks us through this once the appraisal is complete. We opted out of paying $400 for the inspection since my dad already knows what the inspection looks for and did so himself when we toured the house. The appraisal will be out of pocket (costs about the same as the inspection) but is a step that can’t be skipped in order to be fair to both the seller and buyer. An appraiser does the same sweep through as an inspector. Why would you need an inspection? Well, if the house needs questionable amounts of work, it is better to know what you’re getting into prior to proceeding with a contract.

So once I learn more, I’ll explain those as well. For now, we are very hopeful that we will be able to meet any possible obstacles and still have enough to fund any additional home improvement costs. We’d like to purchase a shed for outdoor storage, Put a deck on the back porch, hang a door on one room to make it a bedroom, and turn a rather large walk-in into a storage room, for starters. I know Dad wants to put a lot of work into the yard with more plants and such too. 

I look forward to writing more updates!