Home appraisals are a necessary and crucial step in the buying and selling process. They are often misunderstood or confused with a home inspection or CMA. To help you understand the process and concept of home appraisals, we have outlined below what exactly you should know.
What is a home appraisal?
A home appraisal is essentially an unbiased, expert opinion of what the market value of a home is. It is used to determine if the contract price is in fact a fair value to pay based on the property’s condition and features. Appraisals are usually paid for by the seller and cost about $300.
Are appraisals required?
When you are buying or selling a home to anyone who isn’t paying in all cash, a home appraisal is required. A lender will require that an appraisal is done for their own protection. They want to make sure that the amount requested by the borrower is justified. For example, if the lender loans a buyer $500,000 for a house that is only worth and therefore can only be sold for $100,000, that is a bad investment for them.
Who appraises the home?
An appraiser must be a licensed and/or certified professional with the state. They are legally required to keep an impartial opinion throughout the process. Appraisers must go through specific training and consequences for biased reports are strict so they work hard to be accurate.
The appraisal process
The appraiser will put together a written report after completely assessing the property. They will look at the recent sales of comparable homes in the same area as well as current market trends. They will take into account the condition of the interior and exterior of the house and any necessary maintenance, repairs or safety issues. The amenities and square footage of the home will be noted. Don’t worry about your furniture or decor but it doesn’t hurt to clean up a little and remove any odors! Assume that the appraiser will take into account any relevant data affecting the value of a home.
What to do with the result
The seller will want the appraised value of the home to be either equal to or higher than the price they are trying to sell it for. If it is lower, the seller will be expected to lower the price. If you are unhappy with the value and think it is worth it to get a second opinion, you can challenge the report. However, it is worth noting that the process has a system of checks and balances that ensures accurate results for the most part. The majority of people who challenge appraisals end up with the same results.
Still confused about how home appraisals work or the buying/selling process? Call a Door agent today!