What is a Home Appraisal and How Does it Work?
Check out these tips for homebuyers or home sellers who want to know more about home appraisals.
Whether buying, selling or refinancing a house, you need to know the home’s value, ensuring you do not overpay and the mortgage lender does not overvalue your investment. You find the value of the house by getting a home appraisal.
What Is a Home Appraisal?
A home appraisal is an examination done by a qualified, unbiased appraiser who establishes the value of the home you want to buy, refinance or sell. It serves two primary purposes:
- A home sale determines if the sale price fits based on the location, condition and features of the house.
- For a refinance, it ensures the lender does not lend the homeowner more than the home’s value.
It takes a week to 10 days for the appraiser to complete a home appraisal report.
What Do Home Appraisers Consider?
Appraisers detail many things in their report, including:
- The condition of the home.
- Features or upgrades to the home.
- Value of houses in the neighborhood.
- Square footage of the home and size of the property.
They take pictures of the inside and outside of the home and the surrounding property. They also include a floor plan.
What Makes the Appraisal Lower or Higher?
Things that might raise the appraisal value of a home include:
- Updates to HVAC or other systems.
- Rising property values in the neighborhood.
- Change in the type of utilities (i.e., adding natural gas lines to the neighborhood).
- Excellent curb appeal.
- Desirable location.
- Notable home improvements.
Things that could decrease the appraisal value include:
- Poor real estate market.
- Low curb appeal.
- Limited parking availability.
- Faulty electrical systems.
- Foundation or structural issues.
- Signs of neglect to the home.
- Having only one bathroom.
- Dated HVAC system.
- Accessibility issues.
What Is the Average Cost of an Appraisal?
Home appraisals usually cost several hundred dollars. They might be higher depending on the property’s location and size. The homebuyer or refinance applicant pays for the appraisal.
Is a Home Appraisal Required?
Most lenders require a home appraisal before lending money. Appraisals protect lenders. They do not want to lend more money than a property is worth because the home serves as the collateral on the loan. If the borrower defaults, the lender sells the house to earn back their money, and an overvalued home will not recoup the loan’s value.
Are you buying a new home? We have mortgage calculators to help you determine how much you can afford and excellent home mortgage rates. You can also protect your home with our affordable home insurance.