Buying a home is an exciting adventure, but there are many steps involved that can leave you feeling a bit overwhelmed. One critical part of the process is the home appraisal. In this guide, we’ll break down everything you need to know about home appraisals so that you’re better prepared for this important step in your homebuying journey.
What is a Home Appraisal?
This guide explains the following:
What a home appraisal is
The purpose of an appraisal
How appraisals affect your mortgage
The home appraisal process
How to prepare for an appraisal
FAQ about home appraisals
Here’s a closer look at each.
What is a Home Appraisal?
A home appraisal is an unbiased, professional opinion of a property’s value. It’s conducted by a licensed appraiser who takes into account a variety of factors to determine the market value of the home. These factors can include the home’s age, size, condition, and any upgrades or improvements made. The appraiser will also consider the value of similar homes in the area, known as comparable sales or “comps.”
The Purpose of an Appraisal
The primary purpose of an appraisal is to protect the lender’s investment. Before providing a mortgage, a lender wants to make sure that the home is worth the amount of money they’re lending. This helps minimize the risk of lending money on a property that’s not worth the loan amount. For homebuyers, an appraisal can also serve as a negotiating tool if the appraised value comes in lower than the purchase price.
How Appraisals Affect Your Mortgage
Your mortgage approval and the amount you can borrow depend on the appraised value of the property. If the home appraises at or above the purchase price, you’ll likely be able to secure a mortgage for the full amount. However, if the appraised value comes in lower than the purchase price, the lender may only approve a mortgage for the appraised value. In this scenario, you’ll either need to renegotiate the purchase price with the seller, make up the difference out of pocket, or possibly walk away from the deal.
The Home Appraisal Process
After you’ve made an offer on a home and your offer has been accepted, your lender will order an appraisal. The appraiser will schedule a time to visit the property, inspect its condition, take measurements, and assess the neighborhood. They’ll also research comparable sales in the area to help determine the home’s value. Once the appraiser has gathered all necessary information, they’ll compile a report for the lender, detailing their findings and the property’s estimated value.
How to Prepare for an Appraisal
As a homebuyer, there’s not much you need to do to prepare for an appraisal. However, if you’re also the seller, you can take some steps to help ensure your home appraises at its highest potential value. Make sure your home is clean, well-maintained, and decluttered. Complete any minor repairs, such as fixing leaky faucets or patching holes in the walls. You can also provide the appraiser with a list of any improvements or upgrades you’ve made to the home.
FAQ About Home Appraisals
Check out these commonly asked questions about home appraisals. If you don’t see the answers here, please call our office and we’ll get you the information you need.
Who pays for the appraisal?
Typically, the buyer is responsible for covering the cost of the appraisal, which is usually included in their closing costs.
How long does an appraisal take?
The appraisal process itself can take a few hours, but the final report may take up to a week or more to complete.
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