How The Appraisal Process Works
by Abdul Aziz Mondal Real Estate 03 September 2022
A home appraisal will most certainly play a significant role in the home acquisition process, whether you want to purchase, sell, or refinance a property.
After all, you must be aware of a home’s value in order to make any significant financial decisions regarding it.
If you don’t know everything that goes into an appraisal, it might be nerve-wracking. A mortgage lender near you can explain more in-depth how an appraisal works. Let’s examine what appraisals are, how they function, and how much you may anticipate paying for one.
What Is A Home Appraisal?
The process through which a real estate appraiser ascertains the fair market value of a home is called a home appraisal. It can reassure you and your lender that the home’s asking price is reasonable. Since they are frequently used to calculate property taxes, appraisals are typically required in counties.
Your real estate agent will probably advise you to add an appraisal contingency in the sales contract if you require a mortgage to purchase a home. If the appraisal comes in too low to support the agreed-upon purchase price, the appraisal contingency allows you to walk away from the home purchase.
Appraisals aren’t obligatory, although being generally necessary. In a seller’s market, or if you’re paying cash for your house, you might wish to forego the contingency. But if you’re buying your first house or have a limited budget, it makes a lot of sense.
Additionally, it guards you against overpaying for a home that is actually worth less than what you are paying for it.
The Appraisal Process Examined
To give adequate time to plan a property visit and create the report, the appraisal is conducted as soon as possible after the two parties reach a price agreement.
A house appraiser will be chosen by a lender, who will then get in touch with the seller to schedule a visitation time and date.
Typically, the following criteria are used by a government-sponsored company that backs many mortgages:
1. An appraisal assessment
A home’s exterior and interior are traditionally inspected by appraisers to determine whether the structure is sound, whether there are any safety concerns, how many rooms are present, and whether significant improvements have been made since the last real estate transaction.
During the walk-through, the appraiser typically takes pictures of the home’s various components. Homeowners may be present during the home visit, especially if they still reside there, but the appraiser manages it alone. Although it’s uncommon, buyers can request to be present.
Government-backed loans may have different appraisal visits than ordinary loans do. For instance, in order to comply with federal regulations, an appraiser creating a report for an FHA-backed loan must test utilities and appliances to ensure they are in good working order. A similar set of specifications for an assessment apply to VA loans.
| Note: The appraisal process has been modified, at least temporarily, due to concerns about the coronavirus. For instance, the appraiser might be permitted to conduct a different kind of evaluation that would rely on an outside inspection as well as seller-provided pictures and videos of the interior of the house. |
2. Research
The cost of recently sold similar homes on the real estate market is a significant factor in the appraiser’s value decision. The most pertinent ones are located in the area or close by and share many of the same features as the home in question.
Appraisers often examine public records as well as data on recent property sales from the Multiple Listing Service (MLS) to obtain comparable information.
Real estate professionals publish information about homes for sale in MLS, a database of real estate information. Despite the fact that the database is technically confidential, a lot of the data is freely accessible online.
3. Valuation strategy
The appraiser may decide that using sales comparisons is the best strategy for determining value, or they may choose to use a cost-based strategy, which involves estimating the cost of building the home today and factoring in the land’s value as well.
Frequently Asked Questions (FAQs):
Ans: The appraisal process typically takes seven to ten days. The appraiser pays a visit to the property and spends an hour or so examining the inside and outside of the house, determining its square footage, and assessing its features and fittings. Additionally, the appraiser contrasts the property with other nearby, recently sold properties that are comparable (aka “comps”).
The appraiser produces an appraisal report after performing the physical inspection and comparing the subject to comparables. The intricacy of the appraisal and the workload or schedule of the appraiser determine how long it takes to complete the full process.
Ans: A normal home appraisal costs between $300 and $450. The cost depends on the home’s location, size, and condition. Appraisers ought to be paid a flat rate or an hourly rate. A dishonest practice that should be avoided can be indicated if the appraiser expects to be paid as a percentage of the worth of the house.
Ans: The home appraisal is followed by mortgage underwriting. The underwriter looks over the loan file to make sure everything is in order and that all required paperwork has been provided. The underwriter determines whether to approve or deny the loan based on all available information after assessing the loan’s risk.
Final Verdict
If everything goes as planned, the home appraisal is merely another item to cross off a closing checklist. When the appraised value is less than anticipated, the deal may be postponed or even abandoned.
Any situation you come across, whether buying, selling, or refinancing a house, would benefit from having a basic understanding of how the appraisal process works, especially if it’s your first time doing so.
The house appraisal process is intended to help you, whether you are a buyer or a seller if there is one thing you should take away from it. You understand as a consumer that the product you are purchasing is worthwhile.
Furthermore, if you put in a little extra work as the seller, you may make sure that your house sells for the price it’s worth.
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