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What to Know About Home Appraisals

What buyers and sellers should understand about the house appraising process.

By Bill GassettPublished 4 years ago 7 min read
Real Estate Appraisals Are Essential to Understand

Questions About Real Estate Appraisals You Should Know

Are you planning on buying or selling a home in the near future? If so, you should have at least a basic understanding of what an appraisal is and how it works. The appraisal can be a nervous time in any home transaction. It is not that uncommon for the purchase to fall apart at this stage, leaving the seller to find another buyer.

Let's take a look at all the things you need to know when dealing with an appraisal, whether you are a buyer or a seller. The more educated you are about home appraisals, the better you will be able to navigate the process successfully.

When Does the Appraisal Happen?

An appraisal will typically occur after both an offer has been accepted and a home inspection has been completed. At this point, the buyer is happy with the home and ready to move forward with the purchase. The lender can then send in their appraisal expert to assess the property. The appraiser will need to be licensed in order to conduct a home appraisal. Understanding the appraisal process is crucial.

How Much Does a House Appraisal Cost?

While the lender organizes the appraiser to visit, it will be the buyer that actually pays. The cost involved to have a home appraised can vary depending on location, but you can expect the range to be from $450 to $750. The price can increase if the house is more difficult to assess, but this is unusual.

The house appraisal expense will be part of your purchasing closing costs. You can consider it a cost of doing business when buying a home.

Why are Home Appraisals Needed?

When the home buyer needs a loan to buy the property they want, their lender wants to make sure the amount they are offering is in line with the fair market value. An appraisal provides an impartial analysis of the value of the home. Appraisals are conducted by a third party who has no interest in the house.

This makes sure the lender isn't loaning more than the property is worth, which also protects the buyer from putting their financial future at risk. If the buyer's financial situation changes dramatically, a few years into the mortgage, the appraisal will have saved them from losing a lot of money if they go into foreclosure.

What are Appraisers Looking For?

The majority of appraisers are using the Uniform Residential Appraisal Form when they assess a property. This means that they are looking for certain factors to help assess the home. Things they look at include; the condition of the house, the local housing market, connected utilities, neighborhood demographics, and how the home fits into its surroundings.

They will also consider the age of the home, the condition, parking, the layout, size of the home, and the rooms, as well as the appliances included, among other factors. They are focused on the basics of the property and may ignore upgrades that they feel don't contribute to increasing the value. Many sellers, of course, don't realize this as much as some real estate agents try to explain it.

An appraiser is aiming to work out how the home compares to others in the same area. They look for similar properties locally, using photos, measurements, and other factors to make sure they are making a fair comparison.

To give your home a better chance to be approved favorably, you should make sure it is looking its best. The appraiser is likely to look unfavorably on an untidy house or if it needs obvious maintenance. Even though most appraisers won't express this, it is human nature for someone to downgrade a home if it looks horrible.

It always will behoove any seller to get their home looking it's best. Sometimes doing so may be unavoidable, especially if you are in the middle of moving, and there are boxes all over the place.

What Happens When the Appraiser Visits?

The time the appraiser will take depends on the size of your home. It could be as little as 15 minutes, or as long as an hour. They will take some photos of the outside and check the measurements of your home.

You can be there when the appraisal is being conducted if you want, but it isn't necessary. You might be better leaving the appraiser to get on with their work and go out instead. Having a conversation with the appraiser while they are trying to do their work isn't likely to help their assessment.

Your real estate agent might be able to help if they are there; however, they could answer questions and help justify the reason for the offer price on the home.

When the Appraisal has been Completed

Typically, appraisal reports take around a week to be completed. It can take a little longer, however, so don't be too concerned if you haven't heard anything after a week. They may be waiting for information about whether permits were pulled and verifying other details that are out of their control.

The seller of the home won't get a copy of the appraisal report. The appraisal is owned by the buyer. If the appraisal value is lower than the offer amount, the real estate agent should have some information pretty quickly about what is wrong. At that point, a seller could request getting a copy of the report.

The reports generated through appraisals will contain a lot of information about similar properties to justify the fair market value given. The factors used by the appraiser will be provided in the report so that you know why they came to the conclusion they did.

If the appraiser's valuation is close to the offer from the buyer, the sale can proceed. Your home buying transaction can then continue towards closing, safe in the knowledge that the home is worth the money offered by the buyer.

If the house appraisal comes in significantly lower than the sale price, the sale may not happen, and the buyer could get their house deposit back. First, you will need to determine if the appraisal is accurate. Appraisers are human beings like the rest of us and do make mistakes.

You may find yourself having to challenge the appraisal, which is not always easy. Hopefully, you are working with a skilled real estate agent because you will need one! Let's take a look at what you will need to do.

Challenging an Appraisal

If the appraisal doesn't go the way you want it to, you can, in some circumstances, challenge the finding. Most of the time, things will go your way, with the appraisal matching or going higher than the offer, nine times out of ten.

If the home was considered to be worth less than the contract offer price, your real estate agent might want to discuss the matter with the appraiser. If you want to challenge the appraised value, you will have to go to the lender and provide evidence that supports your case.

As mentioned previously, appraisals can be wrong; they are carried out by humans who are open to making mistakes like everybody else. If you find something in the report that is wrong, you might have a case to submit a reconsideration of value argument to the appraiser. This isn't likely to work out, though, with the appraiser being able to support their opinion with evidence most of the time.

If you aren't happy with the result as a buyer, the only realistic option could be to go with a new lender. A different appraiser could return a better assessment of the property's value, but it is a significant risk.

Renegotiations with the Seller

If the appraisal doesn't find the property to be worth the amount offered, it might be worth trying to renegotiate with the seller to keep the purchase on the table.

As a buyer, if you aren't able to bring more money to make up the difference, perhaps the seller will reduce their price to meet the appraisal. If the buyer can find some other source of income, there is the possibility of meeting somewhere in the middle.

Final Thoughts on House Appraisals

Real Estate appraisals are an integral part of most transactions unless cash is being paid. Occasionally a lender will waive an appraisal, but that is not too common. Usually, when that happens, the buyer is putting down a substantial down payment, leaving the lender with plenty of equity.

Hopefully, you have found this information on appraisals to be helpful.


About the Creator

Bill Gassett

One of the top RE/MAX Real Estate Agents in New England. A passionate writer who's work has been featured in many prestigious real estate publications including The National Association of Realtors, RISMedia, Inman News, and Credit Sesame.

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