Understanding the Home Appraisal Process
February 27, 2017
February 27, 2017
Appraisals are an important part of the home sale process, but many people don’t understand what an appraisal involves or why it’s such a critical part of buying or selling a home. Today, let’s look at some common questions—and answers—about the home appraisal process.
What is an appraisal and who creates it?
An appraisal is a written estimate of the value of a home, created by an unbiased, third-partyappraiser – a person with experience establishing the value of houses, who has no connection to the buyer or the seller.
Most appraisals are conducted by licensed appraisers familiar with the area and market in which the house is located.
Why is an appraisal needed?
Lenders use appraisals to evaluate the amount of the loan they are willing to make, either as purchase money for a home or in refinancing. The appraisal serves as proof of the house’s value, which impacts the amount of money a bank or other financial institution is willing to lend, and at what price.
How does the appraiser determine the value of a home?
Appraisers consider numerous factors when evaluating a home. They look at the house itself, including its age, condition, curb appeal, and other relevant details. They don’t care about moveable things like furniture and art on the walls, but do pay attention to fixtures like sinks and toilets, especially if those fixtures need repair. Appraisers also review recent home sales in the neighborhood, paying special attention to the ones most comparable to the house they are appraising.
Homes in better condition appraise for higher values than those that look run down, ill-maintained, or in need of significant repairs.
Who pays for the appraisal?
In the case of appraisals associated with mortgages or purchase money loans, the buyer often pays the appraisal fee as part of the closing costs. When the appraisal relates to a refinance, the person obtaining the loan (usually, a homeowner) is responsible for the fee. However, like many other parts of real estate transactions, the cost of the appraisal may be shifted to another party, depending on the terms the parties negotiate among themselves.
Appraisals are an important part of buying, selling or refinancing a home. They help establish the value of the property and the amount of the loan a lender is willing to offer. In addition, buyers can sometimes insert language into the purchase contract requiring re-evaluation of the purchase price if the home does not appraise for at least the value the buyer and seller agreed upon.
Although appraisals are a common part of the purchase and sale process, not every sale is contingent upon the house appraising for a certain value. Selling a home to investors is a shorter, less complicated option that may not even involve a formal appraisal. To find out more, click here and get a free, no-obligation quote from 4 Brothers Buy Houses today.