While an inspection looks for defects in the home, a home appraisal? leverages a highly trained professional to determine the current appraised value of it prior to its purchase. In addition to the visual inspection of the home, the appraiser? will take into consideration recent sales of similar properties in the area, current market trends, and features of the home like the square footage, the floor plan, and the general condition of the property. This is another cost you’ll want to account for in addition to the down payment?, inspection, and moving costs.
Why appraisals are usually required
A home appraisal will establish a value that will be used to calculate the amount of money that will be lent to you for the mortgage?. This is important to the lender? because they want to be sure that they understand the value of the asset and the risk they take for lending you money on that property.
How an appraisal works
Your lender will schedule the appraisal with a licensed appraiser. Although your lender makes the arrangement, you are responsible for the payment. The appraiser will assess the general condition of the home, the age of the home, the location of the home, lot size, square footage, number of bedrooms and bathrooms, major structural improvements like remodels and additions, and any additional features, such as an in-ground swimming pool. Appraisers are trained to avoid giving subjective opinions about the home, its decorations, or cleanliness. When figuring out the home’s value, an appraiser will consider similar home values within the area as well as their location.
In some cases, your lender may determine that a trained property data collector (who may not be an appraiser) can visit the home to collect information, including taking photos and measurements, that will be used by a licensed appraiser in determining the property value. Although in limited use right now, it is also becoming more common to provide information to the appraiser using a special mobile application that captures data and photos. These methods may save time, but only your lender can determine if your appraisal is eligible to be completed this way. When an appraisal is required, the home value will always be determined by a licensed appraiser. Ask your lender if you have questions.
What an appraisal determines
Basically, an appraisal determines the current appraised value that the lender will use to underwrite your loan. If the appraisal comes in at less than the purchase price of the home, your lender may not approve your loan or lend you the full amount. Your lender will give you a copy of the appraisal. If you feel that the value established by the appraiser is very different from what you were expecting, discuss your questions with your lender.
Go back to the seller and try to negotiate a lower purchase price for the home
Ask the lender to allow you to order another appraisal
Walk away from the sale
You will definitely want to discuss your options with both your lender and your real estate agent. If an appraisal comes in at the same value as the price of the home, or more than that amount, you are good to move forward with the original loan amount requested.