A home appraisal is an important part of the home buying process. The findings of the appraiser can stop the house purchase in its tracks. There can be some misunderstanding and confusion about appraisals, however.
There are many things you should know about this important part of the home buying process, let’s take a look.
Is a Home Appraisal Different from an Inspection?
Most home purchases will need both a home inspection and a home appraisal, and they aren’t the same thing. A home inspection will look at the major systems of the house including HVAC, plumbing, electric, and more. A home inspector will document any safety hazards or items which need a repair on the home inspection report. This report allows a buyer to determine what they ask for in their repair request.
A home appraisal is done to determine the value of the home. The home appraiser will measure the home to calculate the square footage. They look at the features of the home that affect value. Appraisers will also make sure there are smoke detectors and carbon monoxide detectors in the home. If those are not present, then, that is noted on the report. They will charge a re-inspect fee if they need to come back to make sure the carbon monoxide detector and smoke detector are in place. An appraiser looks at the general condition of the home, and look around the home to assess its value.
The appraiser might notice and report on some repair issues, but an inspector will look at these things in depth.
What Happens During a House Appraisal?
An appraiser will take photographs of the features of the home. They generally inspect the home taking measurements and looking at the general condition of the property. They will note the features of the home to compare them to other “like” properties. An appraiser will then utilize this information to establish the value of the home.
What Information do Appraisal Reports Provide?
The appraisal report will provide details about the property and comparison homes that are for sale or have been sold recently. Along with the price that these other homes sold for, the time they took to sell will also be included.
Any red flags or problems noted with the home that the appraiser noticed about the home will also be included in the report. If cracks in the foundations or water leaks were noticed, this information will be included. Anything that is believed to affect the value of the home will be reported.
Details about the area that the home is located in will also feature in the report. An assessment will be made about how the market is performing in that area and whether the prices are on the rise or not. Appraisers will also note improvements that have a good return on investment.
When the appraisal report is ready, it will be sent to the party which requested it. This means that the lender will get the report even when the buyer has paid for it. Most of the time, however, the lender is required to give a copy to the buyer.
Is a Home Appraisal Really Necessary?
Often home appraisals are required by lenders to make sure they aren’t lending more money than the home is worth. The lender doesn’t want to provide a loan where they could potentially lose out if the home goes into foreclosure.
For the lender to approve the mortgage, the appraisal value has to be the same or greater than the purchase price.
How Long do Appraisals Take?
The home appraiser doesn’t need to be at the property for too long, perhaps only taking half an hour to take notes, photos, calculate square footage, and draw a floor plan. The seller’s real estate agent might be present, but the seller and the buyer don’t need to attend.
It can take a couple of weeks for the final appraisal report to be provided, however. The appraiser needs to find comparative sales data and complete the report.
What Happens if you Think Your Home has Been Undervalued?
The appraiser might conclude that your home is worth less than similar properties in the area. There are reasons why a home may not appraise. It’s is understandable that you would think your home is worth more than your neighbors, but there are likely reasons for this finding that you have missed. This property may be undervalued because it is a fixer-upper and there are obvious signs of deferred maintenance.
A comparable property might have had more square footage, or better finishes, that might not be apparent. The home could also have had improvements made that yours didn’t.
The appraiser is licensed and will have experience in establishing the value of homes, but they could still make mistakes. If you and your real estate agent really think the appraiser has made a mistake, it can be challenged.
If you have some evidence to show why the appraisal was wrong, you can request to have another appraisal carried out. However, most of the time this will not be successful unless very clear errors have been made.
How Much do Appraisals Cost?
A few things affect how much you will have to pay for an appraisal. The complexity of the job and the location of your home are important considerations in how much it will cost.
Typically you can expect to pay somewhere between $300 and $700 for a home appraisal. This cost will normally form part of the closing costs when buying a home.
Whether you are paying cash or obtaining a mortgage, it is a good idea to have an appraisal. If you are unsure about the value of the home, it is recommended to have an appraisal. Often times, a buyer may not want to pay the fee for an appraisal, however, it is recommended to know the value of the home before proceeding with the purchase.
About the Author
The above real estate article “What You Need to Know About Home Appraisals” was written by Sharon Paxson of Newport Beach Real Estate. With experience since 2005 representing clients with their real estate transactions, we welcome the opportunity to share our knowledge and expertise and guide you through the home selling or buying process.
If you are considering selling your home, we welcome the opportunity to work with you and list your home with a top Newport Beach CA Realtor.