Home Appraisals
Home Appraisal: Resources for Homebuyers and Sellers
Most people do not get a home appraisal until they are on the verge of buying or selling a home, at which point it becomes crucial to understand the process. It is possible for those not directly involved in the real estate or mortgage industries to be confused by the appraisal process. In order to assist you, here are some of the most commonly asked questions and answers regarding getting a home appraisal and the next steps you should take in order to purchase or sell a home.
What is a home appraisal?
Lenders typically require home appraisals for properties under contract to ensure that the home value equals or exceeds the mortgage loan amount. A home appraisal assures the lender that the home is worth the purchase price agreed between the buyer and seller, given that the home serves as collateral for the loan.
Why is the home appraisal process so important?
All parties involved in the transaction benefit from a home appraisal, including the lender, the seller, and the prospective purchaser.
Why the lender wants it
It is the lender's responsibility to ensure that the amount of the loan they are approving and lending to the borrower does not exceed the home's fair market value. Lenders in this situation may not be able to sell the home for the same amount they lent the homebuyer and will lose money in this instance. Alternatively, they will assume greater risk if the homebuyer defaults on their loan payments and goes bankrupt.
Why it is important for the homebuyer
A home appraisal provides proof to the buyer that the property has been priced reasonably and hopefully appraises for at least the offer price they submitted to the seller. An appraisal lower than the homebuyer's offer may result in the buyer renegotiating the sale price with the sellers or possibly having to pay more out of pocket since the lender will not cover the entire purchase price. If the home appraisal is higher than the home buyer's offer, the home buyer will have made instant equity in their new home after closing with the title company. The sellers cannot request additional funds since they have already accepted the offer.
Why it is important for the seller
Home appraisals serve as essential information to the seller because they provide them with an accurate assessment of the home's value, also known as the property's fair market value and whether the price of the home is competitive within the local market. The sellers may not recover all the equity they acquired while owning the property if their home is too low. This would result in them losing money. If the seller sets the price too high, they will have to renegotiate with the buyer to either drop the price to the appraised value or ask whether the buyer is willing to cover the additional costs. Learn more about how to determine your home's value.
Frequently Asked Questions
Most popular questions about home appraisals
Who requests the home appraisal?
Following the buyer and seller's contract, the buyer's agent contacts the lender, which then arranges for an appraisal to be conducted. Third-party appraisers must not have any loyalty or ties to the lender, buyer, or seller in order to ensure an objective appraisal. In this case, they are responsible for stating the facts about the property's condition and value. After a lender requests an appraisal, the appraiser usually completes it within 48 hours, depending on the market's activity.
How long does a home appraisal take?
A home appraisal can take 7 - 10 days to complete depending on the housing market in your area, but most appraisers can perform their services within that timeframe. A real estate appraiser knows that everyone involved in the transaction relies on them to conduct the walkthrough, prepare the report, and deliver it to the lender on time. An appraiser may be delayed by the following two situations:
If the appraiser is fully booked, you may have to wait 4-5 days for your house to be scheduled for a walkthrough.
In the event that the appraiser is unable to get access to the property, the process of obtaining a home loan may be delayed. A home appraiser may have to arrange a time to visit the house due to the homeowner's schedule.
It usually doesn't take more than a week for an appraiser to complete the walkthrough and submit their completed report.
How much is a home appraisal, and who pays for it?
Home appraisal prices are influenced by the home's size and location. It is common for home appraisals to cost between $500 and $700, though the cost can reach $1,500 in rural areas or for larger properties.
Usually, the mortgage lender requests the house appraisal, but unless the home buyer pays upfront, the appraisal fee is added to the closing costs. In the event that the sale does not go through, the buyer loses the money. Refunds are not available for this fee.
A homebuyer who wants to get a Federal Housing Administration (FHA) loan or a Veteran's Administration (VA) loan usually must pay the appraisal fee upfront.
What do home appraisers look for?
In determining the value of your home, there are many variables to consider. First and foremost, the appraiser considers the property's general condition and safety. A real estate agent will then compare your home to similar properties recently sold in the same area, just as the seller's agent did when listing your home. When the appraiser determines the fair market value of your house, he or she will take into account any improvements, upgrades, and amenities you have made.
Home values and lender decisions can be influenced by a variety of factors. There may be improvements you can make to your home prior to an appraisal in order to increase the value of your home appraisal.
How do I prepare for a home appraisal?
A home appraisal can be prepared by cleaning, decluttering, and making small repairs and upgrades. A well-maintained home and one that appears in good condition will increase your chances of getting a favorable appraisal.
What hurts a home appraisal?
Your home appraisal can be hurt by a number of factors; the most common is an unkept and cluttered house, an unfinished basement, systems that have not been serviced for years and need to be replaced, and an outdated kitchen.
Can you contest a low appraisal?
It is possible to contest a low appraisal by providing detailed information to your lender that you think the appraiser did not fully consider in evaluating the home.
Can I see what my home is worth even if I am not selling it?
If you want to find out what your home is worth without hiring an appraiser, there are a few ways you can do so. Look at recent sales of homes similar in size and features in your area as a quick guide.