Why An Appraisal Is An Important Part Of The Process When Buying Or Selling A Home
Looking to buy or sell a home? At some point in the process, you’ll need a home appraisal. Home appraisals are an essential part of the process when you buy or sell a home. However, many current and prospective homeowners don’t know all of the details about what an appraisal is, and what it’s for.
In this article, we’ll take a look at the basics of home appraisals – and why it matters. Read on, and learn everything you need to know.
What Is A Home Appraisal?
It’s common for home appraisals and home inspections to be confused – but they are actually completely different things. There are a number of differences between the two.
The biggest difference is that, while a home inspection involves a detailed overview and assessment of the home’s physical condition, a home appraisal does not. A home appraiser will take a look at various parts of the home – but it’s not their job to make sure that everything is in good working order, or to provide a home buyer with a detailed overview of the major systems of the home.
Instead, a home appraisal is intended to determine the Fair Market Value (FMV) of a home. In other words, it’s not intended to ensure that every part of the home is in good shape – but to compare it to other homes and determine the proper sales price for the home.
In most cases, home appraisers are selected by the bank or lender that is responsible for issuing a mortgage on a particular home. The bank prefers to choose their own appraiser, because this means they are more likely to get an objective assessment of a home’s true value.
Even though the bank chooses the appraiser, it’s typical for the buyer of the home to pay for a home appraiser. In some cases, though, the seller may pay for appraisal depending on the negotiations and agreements during the homebuying process.
What Can I Expect From The Home Appraisal Process?
A home appraiser will be looking at the condition of everything that’s a permanent part of your house or is attached to it. To determine the fair market value of your home, they’ll evaluate things like:
- Age of your home
- Total square footage of your home
- Number of bedrooms & baths
- Total number of rooms
- Lot size
- Detached/attached garages
They’ll note the overall condition of all of these elements of the home and quite a few more. Again, though, they are not a home inspector. They will not provide either the buyer or seller with a detailed overview of the condition of these systems.
Depending on the size of your home, the lot, your inspector and a few other factors, the process could take anywhere from 20 minutes to 3 hours, with a time of about 1-2 hours being the most common.
You don’t have to be present for the appraisal, but the appraiser will need access to your home with a lock box. Within about a week, the lender and the buyer will get an appraisal report. Sellers do not always automatically get a copy of the report – but they can request one from the lender.
The report will include an overall assessment of the value of the home, based on things like its overall condition, “comps” (similar homes that have sold in the area recently), the current state of the real estate market, and quite a few other factors.
In most cases, this appraisal will remain valid for about six months. There are no “expiration dates” for appraisals – but most lenders want to see comps that are within 6 months old, since real estate conditions can change quite a bit in this time.
Why Does A Home Appraisal Matter For A Home Seller?
A home appraisal is an unbiased estimate of the value of your home. Though an appraisal is always performed by the lender and buyer as part of the home purchasing process, it’s also possible for home sellers to hire an appraiser of their own before putting their home on the market.
This is known as a “pre-listing appraisal.” A home appraiser who works for you, as the seller, will do the groundwork and provide you with a fair assessment for your home’s value. Whether you’re disagreeing with your friends or family about the value of your home, or you’re just curious about the value of your home because you’re interested in selling or moving, this can be a very valuable thing.
In addition to this, getting a pre-listing appraisal can help you decide what improvements and changes to make to your home before selling it. Your appraisal report will list all of the various factors that affect the value of your home – so you can prioritize changes that will maximize your return on investment.
If you’re planning on selling in a year or two, for example, you can consult with your appraiser to find out what issues may be reducing the value of your home – like outdated carpet and wallpaper, cracks in the plaster, overgrown landscaping, and so on. Then you can hire contractors or perform DIY repairs on these problem areas. By doing so, you’ll likely boost the overall value of your home when it’s time to sell. If you are looking to build new you could also find builders on the northshore.
Why Does A Home Appraisal Matter For A Home Buyer?
A home appraisal matters for a home buyer because it’s very important during the mortgage underwriting process. Mortgage lenders don’t want to lend you much more money than a home is worth – for example, $400,000 for a house that’s only valued at $250,000.
The appraisal is a chance for them to get a better idea of the true value of the home. In most cases, mortgage lenders will want the value of the house to be between 80-97% of the home’s Fair Market Value (FMV). Higher than this, and lenders may not offer you a mortgage.
In addition, a home appraisal helps ensure that your offer is reasonable. If you offer $400,000 for a home, for example, but the appraiser believes it’s only worth $350,000, it may be possible to renegotiate the purchase of the home.
Basically, a home appraisal ensures that both you – and the bank – are getting a good deal on a home. So make sure to read the home appraisal report carefully when you get it.
Know Why Appraisals Matter – For Both Home Buyers And Sellers!
Whether you’re a home buyer getting an appraisal as part of the purchasing and escrow process, or you’re a seller getting a pre-listing appraisal from Joseph Mier & Associates, an appraisal is an important part of the buying/selling process. Know what to expect from the home appraisal process, and you’ll be able to handle the entire process with fewer unexpected surprises and complications!