Despite the “reality” shown on popular HGTV shows, buying a home isn’t always rainbows and butterflies. Real-life issues are bound to emerge after your offer is accepted and the loan process is underway. While there’s no reason to be pessimistic, it’s never a bad thing to be prepared for unseen obstacles. We’ve put together a brief guide to help get you through it.
Home Inspections
A general inspection is standard, and should also be accompanied by an inspection for wood-destroying insects. Depending on the house’s age, it may also be wise to request a sewer inspection. The costs for these inspections is incurred by the buyer, so expect to spend hundreds (and sometimes more) before the house is officially yours. While an inspection might seem tedious and expensive, knowing there’s a termite problem—or any other technical issues with the home—is crucial before moving on in the buying process. Things that can and should set off red flags include issues with foundation, roof repairs, any moisture in the ceiling or walls, A/C unit or structural concerns.
The House Needs (Costly) Repairs
You probably know that the purchase price isn’t the only negotiation you’ll make when buying a home. Remember that even if you have a buyer’s agent, you (and anyone owning the home with you) are your best advocates. If there are issues you find post-inspection in the home you’re buying that require fixes or replacements, don’t assume that credits from the seller’s agent will cover the costs. The last thing you want is to be stuck with a huge repair bill after the home is in your name. Avoid sticker shock by obtaining estimates from repair companies or contractors before you close, and then apply that cost to a negotiated selling price.
The Home Doesn’t Appraise
One big, and usually unexpected stumbling block can be the appraisal. This comes towards the latter half of the contract period, and can catch many buyers and sellers off-guard. If a home is under contract for $250,000, but only appraises at $242,000, there could be a problem. The lower value of the home affects the loan in that it changes the Loan To Value (LTV) ratio, and thus, changes the stakes of the deal on a fundamental level.
The options are for the buyers to renegotiate the sales price of the home, lowering it and thus minimizing their unexpected out-of-pocket expenses, for the buyers to pony up the difference between the sales price and the appraisal, or to terminate the contract altogether.
It’s no picnic to get a low appraisal (on either side of the contract), but it is a hurdle that can be overcome if you know what to expect.
CTA: Let us help you get to the fun part of homeowning. Our friendly and knowledgeable loan originators can offer expert advice on the mortgage process and beyond. Contact us today.