Home Buying in 95014>Question Details

batvanio, Home Buyer in 95014

Can the bank request appraisal before home inspection is done?

Asked by batvanio, 95014 Thu Sep 5, 2013

Our home inspection showed several issues with the house we are purchasing and the seller will likely not agree to fix. In mean time, our lender ordered a home appraisal immediately after we went in contract, before the home inspection. We had to pay close to $1000 for this, and now they are saying that if the deal falls through, we are losing the money. Shouldn't they have waited for the home inspection to finish? I never ordered that appraisal, they say they do it automatically as we go in contract, before any inspections.

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You should be talking with your agent about this. When you wrote your contract to purchase you placed contingencies in the contract. I've never seen a contingency of an appraisal based on the outcome of an inspection.

You could have decided to wait on paying for the appraisal until after the inspection. I imagine you were in a multiple offer situation and needed to make your timeline tights in order to win the bid.

You or your agent will order inspections, at your request. Your lender will order an appraisal because it is needed to approve your loan. The appraiser usually will not go to the property without payment first. Usually the appraiser will ask for a credit card up front. Did you do this?

Your inspections and appraisal fees are insurance you invest in during the investigation of a property. If either of those fails your approval and you have contingencies in place and have not removed those contingencies your earnest money should be returned to you. However those cost are absorbed by you.

The Seller took their property off of the market in hopes that a buyer would perform. The seller has no protection during this that a buyer is going to go through with the purchase. The seller has probably lost other buyers. It's part of the process.

During your initial consultation with your agent all these things would have been discusses, prior to you getting into a car and looking at a property.
2 votes Thank Flag Link Thu Sep 5, 2013
You ordered the appraisal by default when you went into escrow, sent your purchase contract to your lender and signed the lender disclosures. You would have received a package of disclosures to sign and approval for the appraisal would have been in that packet. Most lenders will ask for your credit card info because appraisals are usually paid for up front - if you don't want the appraisal right away, then that is the time to stall.

In this multiple offer market with short contingency time periods, lenders are currently under the gun to turn loan approvals as fast as they can, so diligent lenders will get the appraisal ordered as quickly as possible. Your agent should have known this - if condition issues are present, then you can try to stagger the appraisal and inspections - BUT someone has to consciously do this - otherwise they will all happen at about the same time. And, as you've noticed, once it's been done, you are on the hook to pay for it.
1 vote Thank Flag Link Fri Sep 13, 2013
If there is any doubt on the condition or appraised value, you can plan ahead and either get though the inspection first on property condition issues, or conversely order the appraisal first to make sure the value comes in prior to paying for a professional inspection. Tailor the purchase contract to protect yourself.

You can tell your loan officer to hold off on ordering the appraisal until you give him the go ahead. I do it all the time.

Best of luck!
1 vote Thank Flag Link Thu Sep 5, 2013
It's up to the "quarterback" of your team to coordinate the timing of major contractual and financial events.

Most people don't "get" why you want to hire an agent that is smart as a Dr., shrewd as an Attny & concerned about your $$$'s as a family member. That's why there are 5,000+ Realtors in Santa Clara County alone and folks hire their neighbor, their relative, their kid's soccer coach, etc... They also don't get why you want to hire a Realtors with the experience & wisdom that can ONLY come from doing many transactions. The average Realtor does less than 2 transactions a year! You'd never hire a surgeon or an attorney that only did 1 or 2 surgeries/yr or 1 or 2 legal cases. EVEN when you have a higher standard and select from the top 10% that do 80% of the business, that doesn't mean you'll get someone that's diligent, smart, etc... that's why Real Estate won't become a more professional profession (weed out the rookies, the unethical, the lazy, the not so bright, etc...) until the consumers start seriously interviewing, checking credentials, references, etc...

The answer to your question is yes the lender can move too fast, or the inspection too slow, etc... and yes you will be liable. HOWEVER, now comes another example of where an real pro will shine. A real pro will get you the home you want, with concessions from the Seller IF appropriate.

Good luck! Always hire the best & encourage those you know when Buying or Selling to do the same. Why not?

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1 vote Thank Flag Link Thu Sep 5, 2013
Yes, the bank can have the appraisal done any time. Often the appraisal is the thing that holds up the loan as it can take a week to get it scheduled and another week to get the report. Most contingencies have to be removed before that time. So, it is normal to order it right away.

That being said, you and/or your agent can request the appraisal not be conducted before a certain date or activity (like the inspection). Many lenders will not force the client to pay for the appraisal if they back out of the purchase - but this is a courtesy and they absorb the cost (appraiser still has to get paid). BTW, $1000 sounds like a lot for an appraisal. Even on a rush I typically see around $600 for appraisal.
1 vote Thank Flag Link Thu Sep 5, 2013
I'm assuming that the issues found via inspection are significant enough for you to back out of the contract... Sometimes, it is worth doing a few repairs on your own to get the home you want, but only you can decide.

Lenders typically order the appraisal within the first week in order to confirm the value of the property within your contingency period (usually 17 days)
1 vote Thank Flag Link Thu Sep 5, 2013
YOur Realtor need to know off this and let him take care of this situation.
NEVER heard appraisal taking place before the inspection/option period is over.

Somebody guffedup and wnat to blame you to foot the bill.

Good luck.

Kadibhai (Kadi)
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1 vote Thank Flag Link Thu Sep 5, 2013
OK, I guess I was not clear, but most answers miss the point here. .. I DID NOT APPLY FOR THIS LOAN. I only asked for pre-approval. There was no loan application filled, nothing. I just asked for pre-approval, and the bank went ahead and order the appraisal.
Flag Wed Oct 9, 2013
Not only that, but a lender doesn't pay for the appraisal, it is ordered with a buyer's credit card so the buyer is always made aware of when the appraisal is ordered.
Flag Thu Sep 5, 2013
Things are different here in CA. It's normal for the appraisal to be ordered right away. If the buyer wants it to be done later, they and their agent need to make that clear to the lender in advance. Lenders are doing their best to get the file approved asap.
Flag Thu Sep 5, 2013
One has nothing to do with the other, ever. Yeah, it sucks but again, they do not trigger each other. Event "A" doesn't lead to Event "B".

If you want out, sounds like this is the time to get out before you are asked to sign off on your inspection contingencies. If you didn't pay for an appraisal but they orderred it, I wouldn't pay even if they asked. I'm confident they'll push you to pay for it but as confident that if you dig your feet it, the lender will eat the appraisal fee.

No, they shouldn't have waited for the home inspection though to be finished. Also, you never order the appraisal. The lender always does.
0 votes Thank Flag Link Thu Jan 8, 2015
Hi Batvanio - How did this turn out?

The $1,000 for an appraisal is way high. They are usually $450-$500. The $1,000 sounds more like loan origination fees that may/may not include an appraisal fee.

The key question is whether you (not anyone else) authorized this. This is between you and your lender.

A manager should be able to waive the fees, if they want your business on the next transaction. Worst case you can always go to small claims court to have the judge settle the matter.
0 votes Thank Flag Link Sat Nov 2, 2013
i was just starting to deal with this process and i had to pay 300 for inspection and during that, my lender did ask me to get appraisal payment ready but did wait for me to get back inspection report. I am grateful because yes i had to back out since house need ALOT of work. I just dont understand though having to pay all these fees and than you cant go through with the house and you loose all this money. In the area i am looking, the houses are so old and needs lots of work. How many inspections do i have to pay for and loose money on? I am so worried i am gonna waste part of my down payment on inspection fees since i need inspections on home, well,septic and pest control totalling almost 1000 dollars alone. Than need to pay for appraisal and title search as well. I dont remember having to pay all these fees when i bought my house in florida 11 years ago. Have things changed or is there just a difference in each state?
Flag Tue Jun 16, 2015
I think you have a point. They should never have ordered the appraisal without your consent. I urge my clients to get the inspection first, and then you don't end up wasting time on an offer that wouldn't have gone through in the first place. I think the more knowledge you have up front the better. I would refuse to pay the $1000. Let the lender eat the cost. They will back down if they want your business. Don't be a pansy. Stick up for your rights!
0 votes Thank Flag Link Sat Oct 26, 2013
Hi batvanio,
Normally to even be considered in a multiple offer situation, you need to promise to the seller that you will perform quickly. Time is of the essence. Since the appraisal is usually one of the gating items, lenders will by default order it ASAP.

If you wanted to save money on the appraisal, then you should have given a longer contingency period. The downside of that is if you do it this way, the seller might not pick your offer. Even if your offer price is higher, the seller will prefer to choose a buyer who really likes the house and is more likely to follow through on the purchase. By accepting your offer, the sellers may have lost out on the other buyers who wanted to buy their house.

What are the issues with the house? Yes, if they are serious issues, then you should back out. On the other hand, some issues are common and may already have been figured in your winning offer price. Did the sellers provide you with their own inspections before you made your offer?

You really need a buyers agent to explain all of this stuff to you. If you had an agent, he/she would explain to you that the CAR contract is an AS-IS contract by default, so when you make your offer, you base your offer on the current condition of the home.

Every step of the process has tradeoffs. You should pick a realtor who explains the pros and cons of these different ways to proceed at each step in the process, and then let's you decide which way to go based on all the information presented to you.
0 votes Thank Flag Link Wed Sep 25, 2013
The short answer is yes. Why they would do this points to the experience level of the loan officer. For me it is one of the talking points when I pre-qualify my borrowers. I tell them I will not order the appraisal until the home passes the mechanical inspection. It is just common sense.
0 votes Thank Flag Link Tue Sep 24, 2013
If your purchase offer had an inspection contingency then indeed your biggest risk is probably fees associated with your loan application. The lender did nothing wrong by ordering an appraisal as soon as you asked for the loan.

One of the biggest problems is getting a loan funded when promised. Most lenders are large bureaucracies which plod along step by step. A delay ordering the appraisal could cause you to close escrow late which could cause the sellers to ask for more money from you to cover the expenses they wouldn't have had if you closed escrow on time.

Different lenders and even different loan agents at the same lender can provide ways to minimize your loses but this is not something they are required to do. Ask your real estate agent to talk to your loan agent to help reduce the costs. The real estate business is very person/agent dependent. Different people/agents are given different help because of the likelihood of receiving help in return.

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Juliana Lee
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0 votes Thank Flag Link Tue Sep 24, 2013
Well , the bank may have ordered the appraisal but you can simply call the appraisal company and tell them to wait. If the bank or lender wants your business they usually are glad to wait. I would call the appraiser and offer them some $ on the side to "slow things down a bit" if you know what I mean. Any good and honest appraiser will do this. Good luck and feel free to call for advice!
0 votes Thank Flag Link Wed Sep 18, 2013
That's horrible and wrong advice Betty. This kind of comment is the exact reason that borrowers are prohibited and brokers are prohibited from having any direct contact with an appraiser...if you know what I mean. I sure hope they don't call you for advice. Maybe you can share a cell together with them?
Flag Thu Jan 8, 2015
Really Betty? If you are a Realtor, you may want to reread the NAR Code of Ethics and take the CAR CE course on Ethics.
Before anyone takes Betty's advice, I would suggest consulting an attorney and be aware of any state and federal laws would be broken by bribing an appraiser.
Good luck,
Flag Thu Sep 19, 2013
All I can say is that in our market here in Portland, the bank always wait for permission before ordering an appraisal.
0 votes Thank Flag Link Thu Sep 5, 2013
You've gotten some useful answers and some rather bizarre ones ... So let me try to answer your question in it's entirety.

Your lender has absolutely no relation to your home inspector. You and your Realtor are guiding both sides of the process so one doesn't wait for another... it's just about how you guys schedule things.

As several others have noted, it is standard practice in our highly competitive market to order the appraisal right away as you get into contract. If you don't want the appraisal ordered because you're not sure about the property then by all means tell your lender that. If you don't give them your credit card number, they will not be able to order the appraisal.

Once the appraisal is ordered it's a sunk cost (just like any inspections you choose to do), so if you back out of the transaction you are not getting that money back.

Now if the lender ordered the appraisal "automatically" without notifying you, or getting your permission, then just let them know you will not be paying for it. After all, why should you, if you didn't order it? (hope that helps)

If on the other hand you signed a document giving them permission to order an appraisal and gave them your credit card number (and just forgot about it) then the fault is not on the lender.
Web Reference: http://www.rezrealty.com
0 votes Thank Flag Link Thu Sep 5, 2013
Home Inspections are mostly ordered by the sellers for the disclosures (Paid by the seller). The appraisals are ordered by the lenders - buyer pays for the report. What is $1000.00 for?
0 votes Thank Flag Link Thu Sep 5, 2013
In competing markets such as the Bay Area, it is normal for buyers to put shorter contingency periods to get their offers accepted. Appraisers typically takes about 10days or so to generate appraisal reports. So unless agreed upon or having a longer contingency period on appraisal, typically appraisals are ordered by the lenders as soon as the buyer/s gets in contract in order to remove contingencies on time.
0 votes Thank Flag Link Thu Sep 5, 2013
If you selected this lender to process your loan and you went into contract, they should be applauded for ordering the appraisal ASAP. Can they request it before the inspection? Of course they can and they should. The problem is that appraisals don't cost $1000. What did you pay $1000 for?
0 votes Thank Flag Link Thu Sep 5, 2013
Are you saying that you paid $1000 out of pocket, up front, to your lender? If that's the case maybe you should have picked a different lender to begin with. That being said, the lender has a lot of work to do in order to fund your loan on time. Generally lenders get to work as soon as possible so you are not yelling at them for running late on your closing date. There is no set rule of when the appraisal takes place but usually it has to be ordered within a certain time period after acceptance of your offer. Seven days in my area.

Talk to your agent, if the appraisal has been ordered but not happened yet maybe your agent can pull some strings to get the appraisal postponed until your other issues are resolved.

J.R. Thrasher
0 votes Thank Flag Link Thu Sep 5, 2013
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