Home Appraisal
Home appraisals are an estimation of the house value which gives you an idea of the property’s worth, and how much a lender will lend you to buy it. This means mortgage lenders need a home appraisal before they sanction a loan.
It’s a home appraisal that determines if the house is overpriced, and protects potential buyers from paying extra for the house. It also protects the bank from ending up with a property that’s not as worthy as the amount invested.
They are different from home inspections. Appraisers only note obvious issues but don’t test anything while home inspectors highlight, and test potential problems.
Factors affecting a home appraisal
The three main factors involved here are:
i. Inspection
Certified and state-licensed home appraisers inspect the property to determine its value.
ii. Comparisons
The appraiser compares the house with other recent sales of similar houses in similar areas to determine fair market value. The appraiser also estimates new construction costs to replace the property’s structure if it was destroyed. They also consider land value and depreciation to determine its value.
iii. Final report
The appraiser comes up with the final appraisal report based on the inspection and comparables data.
Home appraisal process
Home appraisers consider these factors while evaluating properties:
a) Size
They consider the land’s size and house, including the number of bathrooms and bedrooms. More bedrooms and bathrooms mean an increased house value.
b) Interiors and exteriors
The appraiser determines and evaluates the condition of materials in the house exterior like the roof, siding, and foundation. They also consider the interior materials used and its condition, and note any damages to walls, floorings, and doors.
c) Home improvements
Improvements and extra features made by the existing owner like a new patio, upgraded bedrooms, or a swimming pool or garage, improves the house’s appraisal.
While the home’s general tidiness may not lead to a higher appraisal amount, trimmed hedges, de-cluttering and clean gutters may affect their evaluation.
Cost of home appraisal
An appraisal generally costs about $300 to $400 for single-family homes while multi-family building appraisals cost about $600. It may increase based on property size.
The mortgage lender orders an appraisal from home appraisers near me, or from the lender’s outsourced appraisal management companies. Though lenders need a home appraisal, the borrower pays the appraisal fee that’s usually included in the sale’s closing costs.
Handling a home appraisal
The mortgage lender has to give you an appraisal report copy as soon as they receive it, or at least 3 days before closing on the property. Review and understand the appraisal.
Consult your real estate agent to ensure it includes accurate information and important details like the house’s proximity to a transportation hub or a favorable school district.
You benefit if the appraisal is higher than the price you pay for the home because it means increased equity. However, if it’s lower than the sale price, you have to follow the contract terms.
You may withdraw the offer and get back your earnest deposit money to avoid paying extra. However, you have to arrange funds to pay the difference if you want the house because the mortgage lender will provide a loan for as much as the appraiser feels the house is worth.
The seller may also compromise and lower the asking price to meet the appraised value. Of course, you can also hire some other recognized home appraisers near me to conduct another appraisal.
Remember, whether you buy the house or not, you have to pay for a home appraisal. So make sure you review all your options with your real estate agent before signing a contract and hiring a home appraiser.