Everything You Need to Know About Appraisals
If you’re selling your home or purchasing one, you should know how much the property is worth. This is why buyers and sellers hire appraisers. An appraiser is essentially someone who can clarify the worth of your home based on the current market. They are highly qualified to research and evaluate homes to figure out their true value. There are a variety of factors that go into calculating property value and appraisers take everything into account to provide an accurate number.
What Are Appraisers Looking For?
When calculating the value of a home, appraisers take into account the size of the lot, the square footage, and any special features that stand out and contribute to the worth of the home. Another factor that is considered is the area around the home; is it next to a busy highway, are there schools nearby, which city is the property in, etc. The lender will request that an appraisal be done on the home in order to confirm what it is worth. This step assures the buyer that they are in fact not paying too much for the home and it helps the lender confirm that they can actually front the loan. Sellers utilize appraisers as well to verify that they are on the correct path when it comes to setting a price, although it is not a requirement since real estate agents are well-equipped to do this. ### Pricing The average appraisal will range from $400 to $500. While appraisals are usually initiated under contract, they are also often purchased prior to this so that buyers can decide what price to set on their property.
Are Appraisals Required?
According to federal regulations, lenders must hire an appraiser for every new mortgage loan, even if the seller gets it appraised on their own. Sometimes appraisals and home inspections are thought to be the same thing. However, home inspections are done by different organizations. An inspector evaluates the structure of the home to make sure it is safe and livable. They check out electrical fixtures, plumbing, and even door jams to name a few. The inspector’s job is to let the buyer know if there are any issues that need to be taken care of. Inspections can be factored in by appraisers when calculating the value of the home, however the two jobs are separate. ### How to Prepare To get ready for your appraisal, make sure your property is as well put together as possible. This will ensure that you get the highest value possible placed on your home. If you have done any renovations on your home, make sure to let the appraiser know, and create a detailed list for them to refer back to. You don’t have to overspend on major renovations, it is the small things that add the most value to a home. Make sure your home is tidy and presentable, and that the grass on your lawn is healthy and trimmed.
The Aftermath
After the appraisal is completed, the lender or bank will review and decide whether or not to approve the loan. Neither party will approve the mortgage loan if the value of the home is less than what the home is being sold for and the down payment is under 20%. This means that if you price your home at $400,000, the appraisal comes back at $350,000, and the buyer puts down 5% ($20,000), the bank will not front the costs. If for some reason the buyer defaulted on their mortgage, the bank or lender would fall short on their investment. There are a few things that can happen if an appraisal doesn’t provide the expected results. Buyers can use this to try to get the asking price down lower or move on to another property if the seller won’t budge. They can also put more money down to make up the difference so that the bank faces less of a financial risk and will lend the money. Whether you are a buyer or a seller, it is important to be informed about the appraisal process. Appraisals are an essential part of home buying and provide valuable information for both buyer and seller.