You’ve found the perfect home and the seller accepted your bid. Congrats! Now, before the bank will approve your loan, they will ask for an appraisal of the house. Your lender picks the appraiser and the buyer foots the bill, usually around $400. The point is to make sure what you are paying for the house is actually what it is worth. Now, if the house is appraised for less than what you’ve agreed to pay, you may be able to lower your closing costs by lowering the purchase price of the house.
What are closing costs?
When you go to “close” on your house, i.e. transfer the title and get the keys to make the home officially yours, you need to pay several fees. Often, these costs are bundled into your mortgage so you don’t have to pay them out of pocket.
Closing costs include:
- Government recording costs
- Appraisal and inspection fees
- Credit report fees
- Lender origination fees
- Title services
- Tax service fees
- Survey fees
- Attorney fees
- Underwriting fees
Closing costs are usually the buyer’s responsibility but you can negotiate to have to the seller pay them.
Lower home price = lower closing costs
Most closing costs are between 2% and 5% of the purchase price of the home. So, if you are able to reduce the price of the home based the appraisal, you are also reducing your closing costs.
Say your bid was $150,000 on the new home. This would make your closing costs between $3,000 and $7,500. The appraiser comes back with an actual value of $125,000. Your lender lowers the amount of your mortgage. Your seller agrees to lower the purchase price to $125,000. Now, you’ll have to pay between $2,500 and $6,250 in closing fees.
If you get an appraisal for less than you’ve initially agreed to pay for the home, it makes sense to try to get the seller to agree to this new lower cost. Yet, sometimes they won’t budge. This could cause an issue because the lender might not want to give out a mortgage for more than the home is worth. In this case, you might need to pay the difference in cash. In this case, still, though, your closing costs might be reduced.
The Austin Summit Group can answer all your important questions
Buying and selling a home isn’t an easy process—that’s why you need top professionals on your side. Mike and Chrissy Caputo run the Austin Summit Group, a leading realty team in the Austin metro area. We’ve got years of experience under our belts and a strong dedication to customer satisfaction. Trust us to give you the right answers to all your important questions. Call us today at (512) 250-0253.