The Home Appraisal
What is a home appraisal? The home appraisal is a vital part to any home buying process as this is the only true way to value your home accurately. This process takes place after negotiations when both parties have agreed upon a price and have an executed contact. At this point your Realtor should coordinate with your lender and schedule the home appraisal.
Why are home appraisals important? No credible financial institution will lend you money for a house without an appraisal.
For example if you have an executed contract for $200,000 and the appraisal comes back at $195,000 both parties will have to renegotiate, as the lender will not lend above their appraised price. In most cases the seller will reduce the price in order to close the deal however in some cases the buyer will have to bring cash to closing to make up the difference. Every scenario is different and vary case by case so please discuss this with you Realtor.
The flip side of this situation is the home appraising for over the negotiated price, $210,000. This is the best case scenario as you've made instant equity in the subject home and you can move forward to next stages of the home buying process.
Who pays for the home appraisal? Usually, it's the seller who pays for it at closing, which can be as high as several hundred dollars. The national average cost for a property appraiser is $309, according to data compiled by HomeAdvisor.com.
How do home appraisals differ from home inspections? The two often get confused, but they aren't the same thing. Both an appraiser and inspector will walk around the house and take a good look at it (usually, the inspector comes first), but they're each at the house for different reasons. The appraiser is looking at the value of the home; the inspector is looking for any defects with the home that may cause you financial grief later.
How long does the appraisal process take? It can vary, in some cases the appraisal can take 2-5 days to 1-2 weeks. It depends on market activity, the lender you're using, condition of the home and how critical the appraiser is. This process can sometimes hold up the closing because underwriters can request more information about the house than they could in past years.
What factors go into deciding the worth of a house? Plenty. The appraiser is looking at the key characteristics of the property including square footage, number of bedrooms and bathrooms, condition of the home, current recently sold comparables that are close in proximity and health and safety issues.
That said, most real estate agents will tell you that it's the recently sold comparables – that is, houses that are similar to your own – that are the main factors in appraising a home. "It's all about property values".
What a good real estate agent will do. If you're selling the home, your agent will be there to meet the appraiser and share the home improvements you've jotted down – and offer other data as well.