Once you’ve made an offer on a home and have applied for a mortgage loan, your lender will order a home appraisal. During an appraisal, a trained professional will evaluate the home’s value.
This routine step in the homebuying process actually holds a lot of weight: If an appraiser determines the value of the home is lower than the purchase price, you may be required to put down additional money.
Learn what factors influence a home’s value, the steps in a home appraisal, and why you need one to purchase your home.
What is a Home Appraisal?
During a home appraisal, a third-party, licensed professional determines the value of the home you want to purchase.
Your mortgage lender orders the appraisal to ensure they’re not lending too much, but appraisals also help buyers make sure they’re not paying too much.
The appraisal takes place after your offer on a home has been accepted. Buyers are required to pay for the appraisal, and this cost usually will be included in your closing costs.
To determine the home’s value, an appraiser takes several factors into account, including:
- Home location and property views
- Size of the home, including number of bedrooms and bathrooms
- New features or special amenities
- Improvements such as additions or remodels
- Age and condition of home
- Sale price of comparable properties that recently were sold
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Why Do You Need an Appraisal?
The purpose of an appraisal is to make a fair assessment of a property’s value. It’s required that this person be independent from the buyer, seller, and lender to ensure there’s no bias.
Why do you need this fair assessment? An appraisal will essentially protect each party — the buyer, seller, and lender — by making sure the value is accurate.
Appraisals might seem frustrating because they’re out of everyone’s control. But it’s important to remember the protection an appraisal provides, especially for buyers.
What are the Steps in a Home Appraisal?
When does the appraisal need to happen, and how does it work? We will take you through the steps to a home appraisal, from start to finish.
1. Contact Your Mortgage Lender
Once you have made an offer on a home and entered a contract with the seller, you’ll call your mortgage lender to officially start the lending process. Your lender will order the appraisal through a third-party service.
2. Prepare for the Appraisal
Sellers usually have a lot they can do to prepare for an appraisal, because they want the home to be in its best shape. But what can buyers do while they wait for the appraisal process and results?
The best course of action is for buyers to educate themselves on the process and understand how it works. Pay attention to dates and deadlines, keep in contact with the seller, and be aware of the area’s comparable properties.
You also should be aware of what the appraiser is looking for, as far as home features and condition, renovations, and repairs. This will help you understand the results of the appraisal report.
3. Review the Appraisal Report
It may take a week or two for the report to come back. Once it does, carefully review it. It will include a complete property analysis, outlining the appraiser’s calculations based on their evaluation of the home.
This evaluation includes the size, condition, and location, as well as sketches, photos, and maps of the property, inside and out. You also will see the current market analysis, with recent comparable home sales.
If the appraisal comes back at the purchase price or higher, this is good news. If it comes back lower, buyers either can renegotiate the price with the seller, make up the difference in the price, or exit the deal.
If you choose to pay more than what the property is worth, it may increase your down payment.
4. If Necessary, Consider Asking for a Re-Evaluation
Since you did your research on the process and were well aware of the factors influencing the appraiser’s decision, you might opt to ask for a re-evaluation if the result seems much lower than expected, or if you strongly believe there are errors.
5. Closing Time
Once the appraisal is complete, the report is back, and the news is in your favor, your lender will work to get your loan approved. Then, you can move forward to close.
Approval Starts with the Right Lender
When you’re ready to start the home-buying process, you need an experienced lender who cares about helping you successfully navigate each step — including the home appraisal.
The mortgage specialists at River City Mortgage are interested in building relationships with borrowers, to help you find a loan that fits your unique goals.
Call us today to get started or simply ask us questions.
We can’t wait to help you move through the mortgage process, so you can get into your new home.
Image by Paul Brennan from Pixabay