What Is a Home Appraisal

This guide covers what is a home appraisal and how the property appraisal process works during the home buying process. When buying a home, there are many factors to consider. From the location to the number of rooms, countless variables can impact your decision.

One factor that will usually be needed when acquiring real estate financing is the appraisal. Appraisals are a critical step in the home-buying process.

While they can be time-consuming, the information they provide is invaluable. Buyers can use the appraisal report to make informed decisions about their purchase, while lenders can use it to determine property value. In the following paragraphs, we will cover the appraisal process when buying real estate.

What is a Home Appraisal?

An appraisal is a professional assessment of a property’s value conducted by a licensed appraiser. It is a critical step in making informed home-buying decisions as it provides an unbiased estimate of the property’s fair market value.

Maintaining objectivity during the home appraisal is critical to ensure the assessment is as accurate and unbiased as possible.

This estimate contains several factors, such as the property’s location, condition, size, and comparable sales in the area. Lenders typically require appraisals before approving a mortgage to ensure they are lending on what the property is worth.

The Home Appraisal Process

The appraisal process typically begins with the appraiser’s visually inspecting the property. During this inspection, the appraiser will evaluate the property’s condition inside and out. A loan officer cannot talk directly to an appraiser:

This is because the agent has a vested interest in the outcome of the appraisal and could influence the appraiser’s opinion.

The property appraisal will also assess any upgrades or renovations made to the property and note any deficiencies or issues that could affect its value. They will also consider the neighborhood and the local real estate market to determine the property’s value.

Comparable Sales Approach Appraisal

Once the visual inspection is complete, the appraiser will research comparable sales in the area. They will look at recently sold properties similar in size, condition, and location to the appraised property. This research will help the appraiser determine a fair market value for the property.

How Appraisers Determine Valuation of Property

Since an appraisal is an unbiased, professional evaluation of a property’s value, it is conducted by a licensed appraiser. It considers the area’s location, size, condition, and comparable properties.

An appraisal aims to ensure that the buyer pays a fair price for the property and that the lender is protected from potential losses.

During the appraisal, the appraiser will typically inspect the property and note any features impacting its value. They will also research comparable properties to determine how the property stacks up. Once the appraisal is complete, the appraiser will provide a report that outlines the property’s value.

The Home Appraisal Process

The appraisal is an extensive process that requires the appraiser to visit the property, take photos, and gather information about the property’s amenities, finishes, and overall condition. The appraiser then compares the property to similar properties that have sold recently. This is known as the ‘comparable sales approach.’

The appraiser will also consider the property’s location, size, and age. The appraiser will then provide a detailed report that includes the property’s value.

The appraisal is mandatory and required by the mortgage lender. A home inspection is voluntary but is highly recommended. It is important to note that the appraisal process differs from a home inspection. The appraisal is focused on the property’s value, while a home inspection is focused on the property’s condition.

Why is a Home Appraisal Important?

An appraisal is a critical step in making an informed home-buying decision. An assessment can make determining a property’s actual value more accessible.

A property appraisal is what lenders bank on for their collateral. The appraisal is what the mortgage lender base their security on the loan they extend borrowers.

If a buyer pays for a property, they may need help to recoup their investment if they decide to sell. Additionally, if a lender approves a loan for an overvalued property, they may risk losing money if the borrower defaults.

What Should Buyers Do with a Home Appraisal Report?

Buyers should carefully review the home appraisal report to ensure they are comfortable with the property’s value. If the property is overvalued, buyers may want to negotiate a lower price or reconsider purchasing.

If the home appraisal report identifies any property issues, buyers may request that the seller make repairs or offer a credit to cover the costs. A home appraisal is critical in making an informed home-buying decision.

A home appraisal provides buyers with an unbiased, professional evaluation of a property’s value and helps ensure they pay a fair price.  As such, buyers should carefully review and use the home appraisal report to inform their decision-making process. Doing so can avoid overpaying for a property and protect themselves and their lender from potential losses.

Who Schedules the Home Appraisal?

Typically, the lender is responsible for scheduling the home appraisal. This is because the lender wants to ensure that the property is worth the amount they are lending. However, the buyer may also schedule an inspection if they are paying cash or want to ensure they make a sound investment. Regardless of who prepares the review, it is vital to ensure that the appraiser is licensed and experienced.

Can My Lender, My Realtor, or Myself Speak with the Appraiser?

A home appraisal is necessary when a property is being sold or refinanced. The home appraisal provides an unbiased estimate of the property’s value, which the lender uses to determine the loan amount and the buyer to decide whether or not to proceed with the purchase. However, who schedules the home appraisal and who can speak with the appraiser is often a question that arises.

How Can You Order and Schedule a Property Appraisal?

Typically, the lender is responsible for scheduling the home appraisal. This is because the lender wants to ensure that the property is worth the amount they are lending. The lender will hire a licensed and certified appraiser to perform appraisals in the state where the property is located.

The home appraisal is ordered once the borrower has completed the loan application and provided the lender with the property details.

The appraiser must remain unbiased in assessing the property’s value. Any attempt to influence the appraiser’s opinion could result in an inaccurate home appraisal, which could have serious consequences for all parties involved. Also, the real estate agent representing the buyer or seller cannot speak with the appraiser during the home appraisal process.

Values That Determine Home Value on Appraisals

In some cases, the borrower may be able to provide the appraiser with information that could impact the home appraisal. For example, if the borrower recently made significant upgrades to the property, they may be able to provide the appraiser with documentation. However, this information should be provided to the lender, who can then pass that information along.

How Much Can an Appraisal Cost?

The cost of a home appraisal can vary depending on various factors, including the property’s location, the home’s size, and the home appraisal’s complexity.

While the lender is responsible for scheduling the home appraisal, neither the lender nor the borrower can speak with the appraiser during the home appraisal process.

On average, a home appraisal can cost between $300 and $500, although it is not uncommon for home appraisals to cost upwards of $1,000 in some cases. It is essential to factor in the cost of a home appraisal when budgeting for a home purchase, as it can significantly impact your overall costs.

How Long Does a Home Appraisal Take?

The answer to this question varies depending on the size of the property, its location, and the complexity of the home appraisal. A standard home appraisal can take two to four weeks to complete. However, in some cases, the process can take longer. This is because the appraiser needs to gather detailed information about the property, which can be time-consuming. If an appraiser is busy, he must also fit into his schedule.

The Home Buying and Mortgage Process

If you should decide to buy before you begin looking for a home, the team at Gustan Cho Associates has vast experience working with buyers to get them ready to purchase their dream home. We can take you through the entire financing process for your home loan. Our support and licensed personnel can connect you to your area title companies, attorneys, and real estate agents who can help as needed.

The team at Gustan Cho Associates has a national reputation for being a one-stop lending shop. We are experts in business, consumer, commercial and residential loans.

Call or text Ronda Butts at 407-460-7999 or email at ronda@gustancho.com for more information and further assistance. Ronda is an experienced, dually licensed real estate agent and mortgage originator. She has successfully guided many homeowners through obtaining a home on both the lending and real estate side. She does not represent buyers or sellers but offers free consultation in 48 states at Gustan Cho Associates by connecting homeowners, buyers, and sellers to the needed sources.