A house appraisal is part of the process of buying your own home through a home loan. The same goes if you are trying to refinance an existing mortgage loan. The lending institution, usually a bank, will require this before approving the loan.
The purpose is to make sure that the money they are giving out would not exceed the estimated value of the property to be purchased since it will serve as a collateral to the loan.
In simplest terms, a home appraisal is an objective evaluation of the market value of the property that can only be performed by certified real estate appraisers.
Here are the things you need to know about home appraisals.
Many factors affect the appraisal of a property
Licensed appraisers use a lot of data such as property documents to accurately get an idea of the current market value of a house. Aside from these, some of the other aspects to consider are the size of the house, the floor plan design, the condition of the entire house, the average house sales in the neighborhood.
A home appraisal is different from a home inspection
While both would need someone who will actually be at the property itself, a home appraisal is for the market value, while a home inspection is for the actual condition of the house itself.
CHECK THIS OUT: What You Need to Know About Home Inspection
A home inspection professional makes an objective assessment of the home's livability and safety, including any recommendations for repairs. A home appraiser does not do that. All he focuses on is finding the value of the home.
A home appraisal is not free
Once you have signed the purchase agreement with the seller, the lender then orders the home appraisal. Often, it is the homebuyer who would pay for the appraisal and form part of the closing costs of the mortgage.
The fee, on the national average, is from $300 to $450. The specific fee depends on the size and location of the house. The buyer doesn't have to do anything during the appraisal. It would also be advisable just to let the appraiser do his job instead of trying to influence their decision. Just note that by the time the appraiser arrives at the house, he would already have done his research on the market.
In general, home appraisers will check the size of the lot and home, the home's condition, the amenities, housing market trends in the area, price of comparable homes' that were sold in the area, among other factors.
Home appraisals are also subject to mistakes
Appraisers are, after all, human and can sometimes overlook crucial details that can affect the home appraisal. Such inaccuracies can derail the home buying process. For the home buyer, if the appraised value comes lower than what is stated in the contract, he may opt to renegotiate with the seller for a lower price, order a second appraisal, or dispute the appraisal.
However, if the home's appraised value turns low and is accurate, the mortgage loan application may not be approved, or an increase in downpayment may be required--if the buyer wants the same loan amount and interest rate.
