Home appraisals are a crucial part of any property purchase, sale, or refinance. The most important tool for determining the property’s worth is a home appraisal.
For many reasons, home appraisals are necessary. If the buyer is looking for financing, they are commonly ordered up. The mortgage lender wants to make sure that the agreed-upon purchase price is comparable with the assessed value. It might adjust the amount of the loan to reflect the home’s assessed value.
It is used to determine the value of a house, calculate the mortgage amount, and complete other transactions that involve your home. This information covers everything you need to know regarding home appraisals.
A professional licensed real estate appraiser conducts a home valuation. The appraiser will perform a thorough inspection of the property, including a tour and evaluation of its condition. They will also consider market factors like comparable properties, also known as ” comps,” that have similar features or qualities to the home and were also recently sold in the area.
The appraiser will prepare an appraisal report following the review. This report, usually the Uniform residential appraisal report, is typically Fannie Mae’s. It contains a description and details about the home’s interior, exterior, construction details, and information about nearby comparable sales. The report contains insight from an appraiser as well as the final appraised value. This number is the fair-market value of the property.
Home appraisal vs home inspection
While Home appraisals may share certain qualities, they do not have the same characteristics. Home inspections are designed to identify potential problems with a property. These can range from cosmetic damage to more serious structural problems that will need repair or replacement.
The condition of the property is what the home inspector will assess. Not the property’s worth. Appraisals are a broad-based assessment intended to establish a fair market price for the property.
What should appraisers be looking for?
An appraiser considers many factors when assessing a property. The appraiser will consider the living conditions of the house in an impressionistic way. While any obvious damage or issues will be considered, the appraiser won’t usually look behind walls to assess the interior of the property. It’s more of an outside-facing assessment of the property’s condition.
Appraisers pay attention to home upgrades and improvements. Appraisers will consider any improvements or modifications that can be made to the home, including major remodels or additions. Typically, home renovations increase the property’s value. Appraisers will take into account both interior and exterior renovations.
Finally, the appraiser will take into account other properties. These are typically located in the same ZIP code and can be compared to the house being inspected in terms of its size, age, or other features. This will give you a broad idea of the market price for similar properties. These comps help to establish context and a range for property values.
How long does it take to get an appraisal?
Appraisals can take many weeks to complete. However, that is not always due to the time it takes for a single, on site appraisal of the house. The average visit takes about an hour.
The schedule of an appraiser will dictate how long it takes. It may take several days before the appraiser comes to your property. The appraiser will then review the comps.
A few days can be enough to complete an appraisal if the appraiser doesn’t have a lot of work, but it is common for finalized appraisal reports to take at least two weeks.
Buyers, sellers, and refinancers: Some appraisal tips
An appraised home’s value can have a significant impact on everything: the sale price, the mortgage size, and the interest rate when refinancing. It is important that buyers do not make offers that are too high on a home’s listing price. Lenders will typically not finance more that 80 percent of the home’s appraised value.
This could lead to an appraisal gap. The buyer may need to pay more down to obtain the loan. A buyer may also include an appraisal clause in the contract. This will allow the sale to be stopped if the difference becomes too high. To avoid an appraisal gap, it is worth looking at similar properties or working with a realtor to conduct a competitive market analysis.
Sellers should ensure that the appraisal accurately represents the property’s true value. Tell the appraiser what offers have been made on the house. This will help to indicate the market demand. You can also attend the appraisal and provide information to the appraiser about any upgrades or renovations that might increase the property’s worth.
It is also worth noting any upgrades to the property if you’re refinancing. This will help to show its true value. Also, fix any obvious cosmetic issues with the house before you have it appraised to accurately reflect its true value.
Appraisals vs. all other home valuation models
Although appraisals are the most popular method for determining a property’s fair market value, they are not necessarily the only option. An algorithmic valuation model (AVMs), can be used to determine the value of your property using comparable properties. These models can be used to estimate the value of your home using comparable properties and are much more efficient than an appraisal.
But they don’t consider the condition of the property as an appraiser. A local appraiser will also not be able to provide the same insights into the market as a property appraiser.
Next steps in home valuations
The home appraisal helps the seller and buyer, as well as the refinancers, determine the fair market value of their property. To keep the transaction moving forward, they might need to resolve any problems, such as a large gap between the home’s selling price and the appraised value. If the transaction meets expectations, it can be moved to the mortgage underwriting stage — and hopefully, a successful close.