Whether you’re buying or selling a home, knowing how home appraisals work is important. Appraisals are a vital step in real estate transactions because they involve a close examination of a property to determine its true value.
Here’s what you need to know about home appraisals, including how they work and how to prepare for them.
What is a home appraisal, and how do they work?
A home appraisal is when a certified professional, called an appraiser, carefully evaluates a property to access its worth.
Appraisers pay attention to both the interior and exterior of the home.
While inside they check the condition and features of each room, including the flooring, walls and ceilings.
Additionally, they examine the home’s important systems like electrical, plumbing, heating and cooling.
Outside the home, the appraiser checks the exterior elements like the roof, siding, windows, doors and landscaping. They’ll take note of any upgrades or improvements to the home. These can include a renovated kitchen or bathroom, energy-efficient features and room additions.
The appraiser also reviews comparable properties in the area to assess how the property compares in terms of size, condition, location and amenities.
Upon completion of their inspection, the appraiser compiles a detailed report and provides an unbiased third-party estimate of the property’s value.
The average cost of a home appraisal ranges from $300 to $500, but the exact price depends on the size and complexity of the property. Appraisals can take up to three hours to complete, and buyers are often responsible for the cost. Your lender will normally order the appraisal as part of the loan process.
Why are home appraisals important?
Home appraisals benefit all parties involved in the sale — sellers, buyers and lenders.
For sellers, the appraisal is an objective assessment of their property’s value, helping them set a realistic asking price. Additionally, appraisals increase a buyer’s confidence. It protects against overpaying for a property.
Mortgage lenders also rely on home appraisals, as these assessments provide loan-to-value ratios and prevent them from lending more than a property’s worth.
How to prepare for the appraisal?
Home sellers can take several steps to prepare their home for an appraisal:
• Thoroughly clean the property and remove any clutter
• Complete minor home repairs (leaky faucets, broken fixtures, etc.)
• Improve curb appeal (trim bushes and mow the lawn)
• Compile a list of upgrades along with supporting documentation, such as receipts or permits
• Make sure the appraiser has access to every part of the property (unlock gates and open doors)
• Make a list of the property’s best features (renovated kitchen, energy-efficient upgrades or updated appliances)
What to expect after a home appraisal?
Getting the report can take as little as two days after the appraisal, but sometimes up to a week or more especially if it’s a busy real estate market.
From a seller’s perspective, the outcome of an appraisal holds major significance. The good news is that many homes appraise for the purchase price; and when the appraisal matches or exceeds the agreed sale price, things usually go smoothly.
However, a low appraisal can impact the sale. In cases where a home’s appraised value is lower than the sale price, the buyer’s lender will likely require a price renegotiation or a larger down payment.
Sellers can also appeal to get a second opinion from a different appraiser.
FirstBank Mortgage understands the significance of home appraisals in the mortgage process. Whether you’re a buyer or a seller, being knowledgeable about appraisals can help you navigate the real estate market with confidence.
If you’re ready to take the next step in your home buying journey, our loan experts can guide you through the process. Contact us today to discuss your mortgage needs.