To determine the value of a property it must undergo a home appraisal. Understanding the home appraisal process and what to expect after it not only prepares buyers but sellers too.
What is a home appraisal?
A home appraisal is an estimate of a home’s value by a licensed appraiser (typically speaking). They come in to inspect the home and also compare the home’s value with other similar properties in the surrounding area. Let’s consider a real-world example of how home appraisals work. A homeowner lists their home for $550,000 and a buyer offers close to their listed price. At $530,000, the homeowner accepts. A mortgage lender for the buyer then needs to ensure the home is actually worth that price and will get an appraiser to ensure this. If the appraiser finds some problems with the home or it is above the mean price of the neighborhood, the mortgage lender may decide to only lend $500,000, leaving the buyer $30,000 under, which is a problem for the buyer! Sometimes homeowners enlist the services of an appraiser when they need to refinance their mortgage, so they aren’t “overpaying” their lender.
Who does a home appraisal?
The good news is that the appraiser has to be 100% neutral, an unbiased third party. And no, there’s no way around them if the buyer is taking out a mortgage.
So, what is considered in a home appraisal?
The general condition of the home is considered. The appraiser will look at the construction materials used, the condition of important features (like a foundation), and any potential problems surrounding the property. The appraiser will also consider the upkeep of the home and look for more notorious maintenance issues. The home’s age is important to the appraisal also. Any additions or renovations get looked at and the appraiser will compare the home to other recent sales of similar homes in the surrounding area.
Who pays for a home appraisal?
The buyer will usually need to foot the bill for the appraiser (although you might get lucky with a seller and they’ll cover it), and it is usually just added into the closing costs. The appraiser’s fee is normally contingent on the size (square footage) of the house.
What happens when the appraisal is completed?
Once all parties concerned have an appraised valuation of the property, which will come in a written report from the appraiser, one of three things will likely occur:
- The appraisal price matches up with the seller and buyer and the mortgage lender can proceed with the paperwork to start the loan. Win-Win!
- If the appraisal price is higher than what the buyer is paying for the home, then the buyer just came into some immediate equity. This is a big win for the buyer, obviously.
- If the appraisal price comes in under what the buyer agreed to pay, then the mortgage lender will only provide a loan for that appraised value. The real estate agent will help the buyer at this point with next steps. This may include renegotiating the price with the seller, appealing the appraiser’s assessment, request another appraisal, or the buyer may simply cover the difference.
When it comes to buying or selling a home, it’s important to be in knowledgeable and trustworthy hands. Lantern Real Estate Group are the premier Real Estate Agents for the metro Atlanta area and would love to get you into your dream home or make your current home someone else’s. https://lanternrealestategroup.com/