We recently purchased a duplex property as our first official home and I started sharing the process of purchasing that duplex in a prior post. Due to the length of content I thought it would be best to break it up into two parts. In that first post I talked about the following steps:
- Preliminary Property Search Online
- Find a Realtor
- Bank Loan Pre-Approval
- Additional Property Search with Realtor
- Tour Properties with Realtor
- Make An Offer and Send Earnest Money
- Review Counter Offer and Renegotiate
- Accept Offer
Now the story can continue. I will pick up immediately after step 8, where we have agreed to a price of $185,000 along with several terms and conditions.
9. Get an Appraisal
Our bank requires a formal appraisal before they can continue forward in financing our purchase. Most banks will. And although this step may not be necessary if we purchased the property with all cash, it is still worthwhile because it validates that we are not overpaying for something.
There are three possible outcomes to the appraisal: it will show the value of the property as MORE than what we agreed to pay for it, it could show it as LESS valuable, or it could MATCH the amount. As long as the value matches or is more than what we agreed to pay, the bank will let us continue forward with the loan and the purchase. If the value is less, then we will have to bring a larger down-payment or choose to cancel our purchase plans.
Our bank identified an appraisal service to use, without asking our opinion or our realtors. This was meant to ensure impartiality. The process was painless and we did not have to be involved. Instead, our realtor met the appraiser at the property on our behalf. After examining the property, they had to go back to their office to run “comps” for the area — comparable sales from recent history.
Nearly 24-48 hours later, we received word that the appraised value came in at $192,000. Success! It may not be much, but because we are purchasing the duplex for $185,000 we will have an instant $7,000 amount of equity in the property after closing. I felt good knowing our negotiating of the price downward resulted some real savings.
10. Hire a Home Inspector
Another requirement from our bank is a formal home inspection. This helps ensure that nothing has been missed by our realtor or us by getting “under the surface” of things at the property. They certainly do not want to finance a purchase if the property has significant damages or problems.
Once again the bank wanted to use their approved service provider, but in this case, they gave us a list to choose from ourselves. Using this approved list, our realtor identified someone she has worked for several other real estate deals — and believed he provided a great service. This made it a simple choice for us.
We did not need to be present for the actual inspection because…
Note From Author
The full “The Process of Purchasing Our Duplex Part 2” post has been back-dated to 08/04/2005. But it was originally published to the Financial Independence Champion (FIChampion.com) Blog on 06/04/2016.
Why Back-Date Posts?
I mentioned in my first post how this blog will be a little different than any other ones you may follow. I still plan to talk about personal finance, rental property, travel, and the pursuit of financial independence. But to give all these topics the right context and the full picture, I need to start at the beginning. I need to fill in the details of life from 2005 until now. I want you to see the successes, the struggles, and all the milestones we passed along the way. Therefore most of the “new” content will be back-dated to their appropriate dates in 2005, 2006, and beyond — until we’re caught up!