Purchase agreement before the appraisal? (sales, real estate, renting)

[mizfit416]

I'm trying to buy the house that I've been renting from a good friend of mine. I got approved for a loan through my bank but before they will appraise the house I have to sign a purchase agreement first. This doesn't make sense to me.

My friend bought the house in 2004 at 60000. It was re-appraised in 2007 at 85000 (I'm having a real hard time believing that). My friend called around for an appraiser and was told why bother spending the out of pocket money when who ever foots the loan is going to want their own appraisal. Makes sense to me. Still waiting to find out the pay off amount but my loan officer told me yesterday that a purchase agreement must be signed before anything else can be done. I don't even know the exact asking price yet???? I thought a purchase agreement was a legal binding document. Why would I sign an agreement for a price unknown without knowing all the info?

Am I wrong? How does this work???

[bustaduke]

Originally Posted by mizfit416

Why would I sign an agreement for a price unknown without knowing all the info?

You don't. Make an offer on the house and state that the house must appraise for the amount of your offer and also include that it must pass inspection or you have the right to remove the offer and receive your down payment back.

busta

[CountryGrl_n_SBC]

My fiance and I are currently under contract on a house so I feel your pain. The "Louisiana Residential Agreement to Buy or Sell" (purchase contract) has a section regarding appraisals where you can opt to have the purchase contingent upon an appraisal that meets or exceeds the sales price, and if it appraises for lower than the sales price, you have the right to go back to the seller and negotiate the sales price down. I've pasted the exact section from the contract below. The weird box characters are check boxes on the actual contract, and you fill in the blank lines with however many days you'd like. I think 3 is standard.
I would recommend reading the entire contract (linked below) and asking a real estate agent any questions you might have. Also, don't forget about closing costs. These are costs incurred in order to close on a house. Usually the appraisal is included in these cost, and whatever company you go through to get a loan will require their own appraiser to perform the appraisal. Our closing costs added up to around 3% of the sales price, and in the purchase contract we asked the seller to pay a portion of those costs. Hope this helps. Please feel free to ask any more questions. I know I had a lot when we first got started.

Louisiana Real Estate Commission* |* Forms (http://www.lrec.state.la.us/forms.htm - broken link)


APPRAISAL: �� This sale is NOT conditioned on appraisal. �� This sale IS conditioned on the appraisal of the Property being not less than the Sale Price. If the appraised value of the Property is equal to or greater than the Sale Price, the BUYER shall pay the Sale Price agreed upon prior to the appraisal. If the appraised value is less than the Sale Price, BUYER shall immediately provide written notification to SELLER of appraised value and BUYER’S request for SELLER to reduce the Sale Price. Within _________________________ (______) calendar days after SELLER’S receipt of such written notification of the appraised value, BUYER shall have the option to pay the Sale Price agreed upon prior to the appraisal or to void this Agreement unless SELLER agrees in writing to reduce the Sale Price to the appraised value or all parties agree to a new Sale Price.

[BetaBeta]

Also since it sounds like you're not using a real estate agent I will pass on a little advice I learned from an old agent years ago, be sure to get title insurance. This way is the bank mucks up and don't clear the title properly you are protected. You will be surprised at how many people get burnt because they were sold a house that family members other than the seller still had inheritance or other rights on.

[Geraldine Hickman]

Originally Posted by BetaBeta

Also since it sounds like you're not using a real estate agent I will pass on a little advice I learned from an old agent years ago, be sure to get title insurance. This way is the bank mucks up and don't clear the title properly you are protected. You will be surprised at how many people get burnt because they were sold a house that family members other than the seller still had inheritance or other rights on.

If you don't use a realtor how do go about obtaining a list of comparable properties? What is the approximate cost of title insurance?

[Restrain]

You can contact an appraiser and he/she will provide a list of comparables for a reasonable fee. A title company can tell you what the title insurance will cost - fixed depending on amount of the mortgage. But you have a lot more fees (survey, messenger fee, recording fee, prorations, etc).

You really need a professional helping you with this one. You can get a local attorney who works real estate for a fixed fee, avoiding the real estate commissions.

[rawrockills]

Originally Posted by Geraldine Hickman

If you don't use a realtor how do go about obtaining a list of comparable properties? What is the approximate cost of title insurance?

You can use Zillow and Trulia as a starting point to look up recently sold properties, but I agree with Restrain, you should really enlist the help of a professional. Real estate can be very confusing.