While purchasing a home should be an exciting time in your lives, fear or uncertainty can arise from one step of the home-buying process. Real estate agents and sellers can be scared by it.
This is called the house appraisal. This is because the appraisal report could lead to the cancellation of the entire purchase.
The appraiser may not be able to communicate or influence the buyer for the next few days, which can cause stress. You may be able to reduce your appraisal concerns by understanding the appraisal. We believe that buyers should have answers to all the most frequently asked questions about appraisals.
- What is an appraisal?
- How much does an appraisal cost you?
- What happens if my appraisal gets low?
- What is the process for appraisal?
- What happens if repairs need to be made by the appraiser
- What is the average time to appraise?
- Who is responsible?
- If I get an appraisal, will I need to have my home inspected?
What is a home assessment?
An appraisal is used in order to determine the value of a piece property. A licensed appraiser is required to do the appraisal, even if there are mortgages involved. Even if the sale is in cash, it’s a good idea that an appraiser is licensed and respected.
Based on the expected property usage, loan type and comparison, the three main types of market value provided are the cost approach (income approach), the cost approach and the comparison. The appraisal report is valuable information for buyers as well as mortgage lenders.
After the appraisal is completed, almost everyone wants to know the same two facts. Do repairs need to be made? It is important to examine the appraisal in relation the following.
What’s included with a Home Assessment?
- Market value
- The condition of the property
- Neighborhood characteristics
- Dimensions and amenities of the house
- Recent comparable sales
- Sales history
- Insurance purposes – The estimated rebuilding price
- Legal information – Property tax, deed, flood area
- Rebuilding costs
- Estimates of rental income (if you own a property).
At first glance, a 30+ page appraisal report may seem overwhelming. An experienced mortgage loan officer can help you understand the report and break it down. The report breaks down each area in great detail. This report contains a wealth of information for buyers.
What is the cost of a home assessment?
This is a common question. This is a common question. There are many factors that make it difficult to provide an all-encompassing answer. Each property and each situation are unique. Appraisers may need to do more work in certain situations, which can result in a higher price. There are many factors that can influence the cost of an appraisal.
- Appraiser fees for local markets
- Direct appraiser vs. appraisal management company
- Comparable rental appraisals tend to be more expensive
- Uniqueness of the property
- Type of property
- Dimensions of the property
- Rural area (limited comparables).
- Rush Order
Home Appraisal Cost Range
This list illustrates that it is difficult to estimate an appraisal cost for a typical home. An appraisal can be expected to cost between $450- $650 in most markets.
We were charged $1,000 by an appraiser. The property is in rural areas so a rental home was required. The information provided on the market rental rates was not complete.
Ten appraisers turned down the appraisal request. A buyer could pay $1,000 to have one appraiser do the appraisal. The buyer accepted it and the transaction was closed. It’s not usual for appraisals to be so expensive.
Think about the possible add-ons
- Proof market rent 150
- Order urgently $50-150
- Manufactured homes $50-150
- Rural (limited sales) $50 – $150
- Unique property $50 – $150
- Size of property: $100 – 200
Each appraiser’s experience is different. The project’s cost can be affected by market conditions, market demand and appraisal companies.
Lenders must inform buyers about the estimated appraisal costs upfront. Lenders must pay additional fees if the appraiser changes the estimate.
Lenders must inform buyers in writing if an appraiser gives additional information or explains their reasons for charging more. The additional cost must be paid by the lender.
What happens if my house appraisal is low?
This is the most serious fear for buyers and all others. Sometimes, the final value of a property is lower than the price paid after an appraiser has measured it. In hot markets, a lower appraisal value might be acceptable. This could be because the housing inventory is so small and prices are so high that buyers are willing pay more than the appraised price.
The buyer has many options if the appraisal falls below the appraised value. If the buyer uses a realtor to communicate their desires, the agent can do so.
Five Buyer Options to Get A Low Appraisal
- Reduce the price to reflect its appraised value
- The buyer pays the difference in appraised and sold values for closing
- The price should not be higher than the value or price
- Cancel the contract
- Transfer to a Renovation Loan
Many will wonder, “Why would a loan be necessary to renovate my property?” This could be a creative answer. Sometimes the home improvement can make the property worth more than its renovation costs.
It may even cover the difference. You can borrow up to 110% of the value of your property with an FHA203k Loan. You could make up the difference by doing a small renovation. You can also add any improvements you wish!
What is the Appraisal Process?
Numerous agencies developed the Home Valuation Code of Conduct in 2009, which is a process that has been used by many other agencies. This rule was created to guarantee a more reliable appraisal process without the involvement of real estate agents and lenders. Prior to this rule lenders could request appraisals directly at their preferred appraiser. Lenders now have to use a random selection method to choose appraisers either from a database or through an appraisal management agency. Here’s a basic overview of the appraisal process.
- Lender submits an appraisement order
- Documentation supporting the purchase contract and support documentation
- Appraisers may reject an order or accept it.
- Appraisers accept the order
- Appraiser schedules appointment with listing agent
- An appraiser inspects your home**
- You can find comparable sales in your local market by researching it.
- The appraisal report has now been completed
- The lender submits the appraisal to the appraiser.
- The lender must provide a copy and acknowledgement of receipt to the buyer.
**A physical inspection of the home includes taking photos, measuring, notating, and highlighting any problems.
Typically, the lender will give the appraisal report directly to the underwriter once it’s received. The appraiser can be contacted by the buyer to discuss the matter.
What Repairs are Required by an Appraiser for Your Property
A buyer would like the appraisal to be completed “as it is”. This is the most common goal. This usually involves a type of repair. A mortgage, or a renovation loan, may be involved. Repairs will need to be made.
These are the options often open to buyers after the appraiser has notified.
- Ask the seller to make repairs
- Repairs must be paid by the buyer
- Realtors pay for repairs
- Renovation loan
- Resign from your contract
These options are sometimes possible by setting up an account with a lender to hold an escrow. An escrow reserve is a temporary account which allows you to have sufficient funds to pay for repairs. This arrangement is great because the repairs can be completed only after you close.
An escrow loan or renovation can be a great option to make repairs. This is especially true if your foreclosure is being sold. Many foreclosure sellers are unwilling to allow repairs.
Repairs to appraisals are discussed between the buyer and the loan officer as well as the buyer’s agent.
What is the average time it takes to appraise a house?
Another loaded question. It all depends upon the appraisal complexity, how much the appraiser order is, the distance traveled and speed of the appraiser. In a matter of days, it is now possible for an appraisal to be completed.
Rush requests or fees could increase the chance of this turnaround. Normal turnaround times are one week. Appraisals may take up to 2 weeks. Appraisals take approximately 2 weeks unless the lender requests a specific turnaround. Sellers can speed up the appraisal process.
Who orders the home assessment?
It all depends on whether there is mortgage involved. An appraisal can be requested for any home that is being purchased with cash. For cash purchases, an appraisal is not required. To verify the value, however, it is recommended that an appraisal be done.
Mortgages are very particular for the HVCC. As mentioned above, the lender must order an appraise using an impartial system. The buyer has no control over the request to have a home appraised. Lenders can refuse to provide an appraisal if the buyer requests one.
Is it still necessary to have a home inspector?
Many people believe an appraisal is the equivalent of a home inspection. This is false. Even though the appraiser might include property condition, it is not a complete home inspection. This site has a great article that explains what the difference is between home inspection and appraisal.