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I know the typical real estate contract states 10 days from acceptance that the inspections would need to be performed. I'm curious if there is a time frame on a bank appraisal? The reason I ask is if one is buying a home that is asking way above the comps, how soon would you know the house was not appraising and then either the buyer has to kick in more cash or seller has to lower.
Really, really depends on where you live and what kind of turnarounds you're seeing in your area with lenders. Around Metro Atlanta, we're usually writing appraisal deadlines due 19-20 days after binding, with financing contingencies of between 21-28 days, depending on the lender. If it's a lender we know and trust, then shorter. If it's some no-name broker whose stationery on the pre-qual looked like it was cobbled together on Microsoft Word, then longer . . .
Read your contract. In Georgia, generally, as long as the appraisal came in on time, then another scenario kicks in if there's a shortage on the appraisal compared to the sales price -- the buyer has to notify the seller, and they have X number of days to work it out, or else everyone just picks up their toys and goes home (the third scenario). (Which is usually not advised -- because the seller is going to have the same problem on the next buyer, too.)
You forgot the fourth scenario -- the buyer and seller meet halfway. We just had one that was $15K less than the sales price. Appraiser was not familiar with the area at all, and really screwed up the appraisal. We applied for another appraisal, and -- surprise! -- was granted one. However, the score on the second appraisal came in at 5. The previous appraisal was a 3, so the bank chose to use the first appraisal. The buyer and seller agreed to meet in the middle, seller dropped price by $7,500, buyer kicked in additional $7,500. That one took several amendments to extend the appraisal and financing contingencies multiple times while we worked out the issue, but both buyer and seller were dealing in good faith, so it was a matter of documentation rather than fighting over it.
Another solution to the low appraisal: pull the loan and go elsewhere. A large portion of low appraisal contracts are successful when moved. The online lender doesn't have the established relationships with appraisers that the local lenders may have. On these loan rescues, many times the seller is footing the bill for the appraisal, as well as making sure the buyer has a similar rate and fees (or better). Now, if you are going VA or FHA, YMMV. Those appraisals stick for 6 months and 4 months, respectively and it's renegotiate or go home. The seller then must find a buyer not using VA or FHA financing, whichever the failed appraisal had.
I lend nationwide and can say from observation 97% of the resale contracts have a 10 day review of HOA docs (I believe that's driven by state laws), but when it comes to loan approval and appraisal, there are blank lines to complete the number of days: _______days for loan approval contingency to be removed and _____days for the appraisal contingency to be removed.
This is why pre-approval is so very important. If a buyer has a loan commitment in hand when making an offer, the # of days for loan approval can go to 7 days, or even less. While not as good as a cash offer, a pre-approval is the next best thing.
There are, of course numerous additional contingencies that can be in a contract, but the financing aspects (approval and appraisal) are pretty much universal. Now, if someone has a new home purchase contract, new homes contracts are written by the builder's legal team and almost certainly will favor the builder.
Many lenders wait until the inspection period /option period has passed, and the loan is well into the process, to order the appraisal. That way no one is out cost of appraisal for house, if the buyer terminates due to inspection issues. It can take 1-5 days to get appraiser out after ordering it, and another week or so for appraisal to come back after lender reviews it.
One of my listings just went under contract (VA loan) in a rural area here in Central TX. 5 days later the appraiser called me to get the gate code. Now, had this been in the metropolitan area, it would have probably taken an extra two weeks. Point being, it varies depending on multiple factors. In my case, there aren't that many homes going under contract in rural areas compared to the city or burbs.
I'm in SoCal and our appraisal was scheduled for the 19th and we just got the report yesterday the 31st.
The wait seemed like forever to get the report and now the seller has written a rebuttal to the appraisal (since it appraised 10k lower). Which will take at least another week for my CU to review the rebuttal, possibly send it to the appraiser, then have the appraiser reevaluate their report.
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