Home Appraisals 101: Everything You Need To Know
Homes are expensive things. That’s why whether you’re buying a house or selling one, it’s important to be well-educated on the home appraisal process. If you’re unfamiliar or just need a refresher, we’re here to help.
What is a home appraisal?
In short, a home appraisal is a very good estimate of how much a property is worth. Home appraisers use factors such as amenities, area, recent sales, and property condition to provide an estimate.
Why do you need a home appraisal?
Because pretty much 0% of credible financial institutions out there will let you borrow money for a property without an appraisal. Banks are all about protecting themselves, and without an appraisal, they can’t determine what a loan collateral will sell for if things go sour. This helps them avoid lending a borrower half a million dollars only to end up stuck with a home that will only sell for $200,000 or less.
Is a home appraisal the same as a home inspection?
No! A lot of people get confused between the two since they both involve an appraiser or inspector walking throughout the property to check things out. A home inspector is there to discover any defects with the house that could bring financial problems in the future.
An appraiser, on the other hand, is there just to determine the value of the home. That being said, an appraiser is likely to request an inspection if they notice any issues that require another look.
How is the home appraisal paid for?
More often than not, it is the seller’s responsibility to pay for home appraisal costs upon closing. According to HomeAdvisor.com, the average cost for a home appraiser in America is around $300.
How does the appraiser determine a home’s worth?
There are a number of factors but the main ones include the basics. Appraisers will look at the number of bathrooms and bedrooms, the condition of the property, square footage, and even any safety/health issues. Of course, appraisers tend to pay a lot of attention to how comparable homes in the area sold recently.
How much time does an appraisal take?
Due to federal guideline changes, the appraisal process now usually takes between a week or two. This gives real estate agents and sellers more time to collect photos and other data.
How can you prepare for a home appraisal?
As a homeowner, you should do everything in your power to make sure the place looks nice and attractive. Doing some cleaning, repairs, and upgrades prior to the appraiser’s arrival is recommended if you want to increase your home’s value.
Make sure everything outside is in excellent shape, which means mowing the lawn, trimming bushes, etc. Every room inside should also be cleaned and ready for showing. Any small repairs and renovations are also recommended. Just don’t overdo it: remodeling your kitchen for $20,000 doesn’t mean your home will go up in value for that exact amount.
What if the appraisal value is higher/lower than the negotiated price?
Appraisals are tricky because they’re done after a price has been agreed on and contracts have been signed. The good news is that you’re not obligated to purchase the house if you’re jumping into a significantly inflated price. Make sure the sales-and-purchase agreement allows the possibility of renegotiating the price or terminating the contract if necessary.
Want to know more about home appraisals? Find out how a home appraisal can impact your deal in this article.