A home appraisal is an important step in the mortgage process. It helps the lender ensure that it isn’t lending more than a property is worth. A low appraisal can also prompt a buyer to reopen price negotiations with the seller.
Be sure to let your appraiser know of any upgrades you’ve made that might increase the property value. This can help speed up the process.
The Appraisal Process
The home appraisal process is one of the most important parts of a real estate transaction. It allows buyers to make sure that they aren’t paying too much for a home and that they will get a good return on their investment when it comes time to sell. It also helps lenders ensure that they are lending money for a property that is worth the amount being borrowed.
As part of the appraisal process, an appraiser will look at the condition of the property inside and out. They will also conduct research to determine the home’s value. This can include looking at government records and comparing prices of homes in the area that have similar features.
Many homeowners are surprised to learn that their neighbors’ homes are valued higher than theirs. This can be frustrating, but it’s important to remember that there are a number of reasons why this might be the case. For example, the neighboring homes may have more square footage, fewer problems, or more upgrades.
The Appraiser’s Role
The appraiser’s job is to assemble and analyze information and provide an objective opinion of value. The information gathered is often complex and requires specialized training and experience. The result is a detailed report that can serve many purposes.
The most common use of a real estate appraisal is to support a financing request. Mortgage lenders need an objective and unbiased estimate of value to understand the collateral value of the property they are lending against.
When a home buyer asks for an appraisal, the appraiser will visit the property and perform a physical inspection. They will look at the outside of the home, then go inside and assess the condition. They will consider things like the number of bedrooms, square footage and garage size.
The real estate appraiser will also research the neighborhood and comparable homes. They will make sure the house is not in a flood zone or subject to health code violations.
The Appraisal Report
The opening section of a typical home appraisal form lists all the property’s relevant public records, such as its address and legal description. It also notes whether the house is in a PUD, or Planned Unit Development, which refers to projects that combine multiple homes and property in exchange for mandatory homeowner’s association (HOA) fees.
The report also asks about off-site improvements, such as competitive utilities and street enhancements, and notes any encroachments or adverse site conditions.
The next part of the report details the sales comparison approach, in which the appraiser tries to work out what it would cost to build the same house on the subject property’s site. This calculation includes the value of the land, the cost of designing and building on top of it, and subtracting depreciation.
It excludes non-living areas, such as garages and small sheds. The report also identifies any health and safety hazards, such as old wiring or a lack of railing along stairs.
The Appraisal Fee
A real estate appraisal is a necessary step in the home buying process. It allows for an objective look at a property to determine its value, and is a requirement of obtaining mortgage financing. It also ensures that a seller doesn’t overprice the home.
Appraisers are licensed and trained professionals who can provide a detailed report on the home’s value. Their fees vary, but most are between $300 and $450 for a single-family home. This fee includes upfront research on the legal description of a property, along with a visual inspection and comparison to comparable homes in the area.
During the inspection, the appraiser checks that the house is structurally sound and doesn’t have any safety issues. They take photos of the interior and exterior, as well as note any upgrades or renovations.
Then, they create a report that outlines the home’s value based on sales of comparable properties. Depending on the transaction, the appraiser’s report may be used to help determine whether a sale can proceed as planned or if a mortgage needs to be modified.