An appraisal can make or break a sale for home buyers and sellers alike. The home appraisal process determines a property's current market value. It's an essential step in buying and selling and helps determine whether a property sale/purchase will succeed. The buyer's lender uses the home appraisal to determine whether the mortgage amount is appropriate for the property's value. A professional appraiser will conduct the home appraisal by evaluating the property and researching local and current market trends.
What Is a Home Appraisal?
An appraisal is a formal estimate of a home's value. The appraisal process can mean the difference between buying and selling or even whether a buyer can secure financing. An appraisal looks at the things that determine a home's value, such as its square footage and architectural features, and analyzes the market for similar homes in the area. Appraisers will also consider location, size, condition, and other factors that affect a home's value. When a buyer intends to purchase a home with a mortgage, their lender will use the appraisal amount to determine how much of a loan the buyer needs. Lenders often require that all properties receive appraisals before approving financing.
How an Appraisal Works
The first step in an appraisal is for a qualified appraiser to visit the home and inspect it. The appraiser will also look at similar homes nearby and gather information about the market for these properties. Then they will use that knowledge and local building data to arrive at a value amount. Appraisers typically offer an opinion on whether the value of a home is higher or lower than the seller's asking price.
Here are the steps to an appraisal in more detail:
The buyer's lender requests a home appraisal to determine how much a home is worth.
The lender hires an independent professional appraiser to examine the property and the most recent sales prices of comparable properties in the neighborhood.
The appraiser reviews information about other recently sold homes in the area, then visits the property to estimate its value. The appraiser also determines the value of any upgrades to the property, mainly if they were done recently or at considerable expense.
The appraiser uses all this data to determine a "market value" for the property. The lender then decides whether or not to approve financing based on the appraisal amount. The lender creates a report explaining their conclusion to help set the loan amount.
Cost of an Appraisal on a Home
An appraisal cost depends on the property type and its complexity. Appraisers also charge extra for examining fixtures or special features that add value to some homes. The appraisal on a home typically costs between $300 to $450.
How Long Does an Appraisal Take?
You may be asking, "how long does an appraisal take?" so you can best plan your time before a home sale or purchase. The appraisal timeline depends on the seller's availability, the property's complexity, and the appraiser's schedule. It also varies depending on location. Appraisals are typically scheduled two to 14 days out. The on-site inspection lasts about three days on average. The final appraisal phase typically falls within two to seven days of receiving the appraisal report.
How Long Does It Take To Get Appraisal Back?
How long it takes to get appraisal back depends on the lender, the appraisal company, and their busy schedules. An estimate takes approximately three days to get back. Lenders can then determine if the buyer qualifies for a mortgage.
How Long Does an Appraisal Report Take?
The appraisal report takes approximately three days to complete. The lender will review the report and determine how to apply it to the buyer's loan. The appraisal report helps determine the type of loan the buyer qualifies for, how much they can borrow, and the interest rate they can get. Lenders usually return appraisal reports to the home buyer within one to two business days after receiving the information.
What Does an Appraiser Look For?
When you hire a home appraiser, you'll want to ensure they have experience in your area. Appraisers use an industry-standard checklist to value local homes based on location, condition, and size. Appraisers look at three key categories:
1. Exterior Integrity
Exterior integrity examines the outside of the property, including the roof, foundation, siding, and windows. All of these components influence the overall value of your home because they affect how well it will hold up over time. Your home's exterior condition is the primary factor in determining its value.
2. Internal Condition
An appraiser will consider other important aspects of your home's interior, like the condition of its wallpaper, flooring, and other accessories. Inspectors also look at the state of the wiring and plumbing to determine if they are in good working order.
3. Comparable Sales (Comps)
The most accurate way to determine a home's value is to look at houses recently sold in the same area. These are called comparable sales. Appraisers use current sale prices in your neighborhood to estimate the value of your home.
What to Do After You've Got the Appraisal Report
Home buyers purchasing their next home will use the appraisal report to determine the loan amount they can get. They'll use this information to find a lender willing to offer them a mortgage. After an appraisal, you might feel apprehensive about how much you want to offer for a home. If you pay too much, the lender must make up the difference, which could mean your mortgage payments will be higher. Your goal should be to find a lender who offers you a loan amount equal to or slightly more than the appraisal amount.
Appraisals are an essential part of the home-buying process. The above information will get you started, but the process can still feel overwhelming.
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