What Should You Know About Appraisals?

Today, I want to discuss what a home appraisal is and why they are
needed when purchasing a house. An appraisal is an unbiased
professional opinion of a home’s value. In a purchase and sale
transaction, an appraisal is used to determine whether a home’s
contract price is appropriate given the home’s conditions,
location, and features. Lenders want to make sure that homeowners
are not over-borrowing for the property because the home serves as
collateral for the mortgage. If the borrower defaults on the
mortgage and forecloses, the lender can recoup the money by selling
the home. Because the appraisal primarily protects the lender’s
interest, the lender will usually order the appraisal. The value
found by the appraisal is influenced by recent sales of similar
homes, current market trends, the home’s amenities, floor plan, and
accessibility. The appraiser must do a complete visual inspection
of the interior and exterior and note any condition that might
adversely affect the property’s value, such as needed repairs. “An
appraisal is an important part of the transaction process.” Next,
the appraiser provides a comprehensive report that includes an
analysis and conclusions about the property’s value. An appraisal
typically costs between $400-$500, and generally, the borrower pays
the fee. When you’re buying a home and you’re under contract, the
appraisal will be one of the first steps in the closing process. If
the appraisal comes in at or above the contract price, the
transaction proceeds as planned. On the other hand, if the
appraisal comes in below the contract price, it can delay or derail
the transaction. Chances are, neither you nor the seller want the
transaction to fall through, and as a buyer, you have an advantage
in that a low appraisal can serve as a negotiating tool to convince
the seller to lower the price so the transaction can move forward.
If you’re a seller, it might be a good idea to get an appraisal
before you list your home to get a better idea of what the current
market value of your home is from a third-party perspective. When
everything goes smoothly, the home appraisal is just another box to
check on a loan closing checklist, which is the goal for buyers,
sellers, and lenders in the transaction process. If you have any
questions about this topic, or if you need real estate assistance
of any kind, don’t hesitate to reach out to us. We would love to
hear from you!