Welcome back! You are reading the 6th and the last post of our “how we bought our ranch house” series. To recap, we got pre-qualified during the first week, started looking at houses and even put our first offer down during the second week. After failing a bidding war, we are lucky to find our ranch and put an offer on it during the our 3rd week of house-hunting. After some inspection and negotiation, we were successfully under contract in week five!
Week five and six – Appraisal and loan application – 5.22-6.1
Now both the seller and we were locked into the contract, whether this deal would work through is depending on if we could get our loan approved.
As our broker promised, the same day we put down an offer (in both offers), she sent the realtors in both parties our pre-qualification letter. And the day we were both locked in, she started to prepare our loan application.
We switched from talking to our realtor on the phone, to emailing back and forth with our broker. In addition to the loan application, our broker also, along with our realtor, took care of the paperwork with the title company. We did drop off an earnest check, as a deposit for the contract, as soon as we locked the offer. And the appraisal was ordered through our broker immediately.
This is what happened during the fifth week:
- Dropping off an earnest check for $2000 (a deposit of our contract and will be used towards our down payment in the end)
- Ordered appraisal ($750) for the ranch
- Appraiser came out on Wednesday and looked at the house (usually within a week but this guy acts fast! No complains there!)
- Appraisal report sent to bank and our broker. Pass!
- We got a pre-approval notice from the bank and our broker
The appraiser is ordered by the bank and paid by us, but he/she (in this case it was a “he”) is an independent party in the whole process. He is supposed to inspect the house (similar to an inspector, so we knew what he would find already), do the comps like our realtor did (so we knew what the result will be too), and produce an honest and non-biased report to the bank to say “this house is worth $xxx”. He shall also determine if the house is safe to live in, which means if we had a roof that is giving in, we would have to fix it before moving.
The house appraised for $320K, which was very fair. According to Kerry, our realtor, appraisers usually report conservatively, a practice adopted after the last housing crash. That means our $310K house (or $315K + $5K concession, depending how you look at it), is DEFINITELY worth $320K and possibly more, AS IS TODAY.
The appraisal process could break a deal even though both the seller and the buyer want to follow through, because IT IS THE BANK WHO BUYS THE HOUSE, not you. Let us say that a house is worth $300K, and you love it so much that you are willing to pay $350K for it. The problem is that you have only $40K down payment and needed the bank to give you a $310K loan. The appraiser came in and said it is not worth $350K, but $300K, which is lower than the amount of the loan you need for the house. At this point, since the bank would not give you a penny more than $300K, you are $10K short and cannot buy it.
This is the general concept and the real calculations is a bit more complicated with closing costs. Buy you get the idea. Unless you have CASH, even you are able to get a $350K loan for a $350K house, you cannot get a $350K loan for a house that is only worth $300K. So if you are on a seller’s market and need to overpay, you’d better have more down payment.
We got officially approved on 6/1, the beginning of the 6th week since we started the whole process. Based on an online estimate, homebuyers usually spend 30-60 days shopping and up to 60 days from contract to close. For first time home buyers, this process is usually longer. We consider ourselves very lucky. For us, from putting down our offer on 5/10, to getting everything cleared, it only took three weeks! Needless to say that we daydreamed the whole long weekend about the ranch, and we might have bought a few electrical tools. 😊
The rest of the week six and the week seven – Waiting.
We originally planned to close on 6/9, which would give us a few days to do some initial work on the house before moving in on the 15th. But it did not work with everyone’s schedule. We closed on 13th and immediately moved in without even a chance to clean the house. Needless to say that it was painful to wait the last two weeks, but we do need to give the seller’s family time to move out. The family lived there for 20 years, I think all of their five children were born in this house. Judging on how well the house was maintained, I believe they care about this ranch a lot. Yes there is an old roof, but it is not leaking and the supporting trellises in the attic are in excellent shape. Yes there is a small dent on the garage slab, but the foundation is almost perfect – better than many younger houses we have seen. Yes there is an outdated kitchen, but from the awards and trophies on the wall, you can tell that the children are such good students and they are so loved.
They even have a small dog.
I have no doubt that Slav will make this house a wonderful home for our family. And Roxie and Charlie will enjoy the yard as much as this small dog does. We will love and protect this house as this family did for the last two decades. We wish them the best!