What You Need to Know About Getting A Home Appraisal
09-29-2020 • MHS Lending
There are so many steps that go into buying, selling, and refinancing a home. While a lot of these happen behind the scenes with your lender and realtor, there are a few key steps you should pay attention to. Understanding the home appraisal process is crucial, especially given that 18% of real estate contract delays were due to appraisal issues in June 2020. The more you know going into your home buying journey, the more confident you’ll feel that you made the best investment.
What exactly is a home appraisal?
Before we get into the details of how an appraisal works and what happens during the process, it’s important to understand what exactly a home appraisal is. This term is thrown around all the time in the world of real estate and many people don’t understand the definition. According to NerdWallet, a home appraisal is a licensed or certified appraiser’s opinion of the home’s value.
Appraisers do research in the current market surrounding the property and do a full inspection of the home to determine the value of the property. Lenders use home appraisals to determine the risk of the loan and whether or not the price makes sense in comparison to the property’s value. It is essentially an unbiased property review that helps the lender protect itself against lending more than it might be able to recover should the buyer default on the loan.
What is the difference between a home appraisal and a home inspection?
Home inspections generally occur when there’s a sale of a home, rather than when there’s a refinance. The buyer will hire a certified home inspector of their choice who comes and looks closely at every aspect of the home. From the roof to the basement, home inspectors check everything in the structure and provide a full visual report. The goal of an inspection is to determine if there are any health, safety or major technical issues with the property. It is at this step in the process that the buyer can use the information they find to renegotiate their offer or request repairs. The seller can then decide how they would like to move forward.
On the other hand, home appraisals are a review of the property’s fair market value. These typically happen within a week after the home inspection is final. It makes the most sense to wait until everyone involved in this loan has agreed upon a price, repairs and any credits. This is one of the final steps in the process, as now it’s time to determine the fair market value.
How does a home appraisal work?
Unlike a home inspection, the lender will likely be the one to choose a reputable home appraiser. The fee will be paid by the borrower and typically ranges between $300-500 and is paid separate from closing costs. All 50 states require that appraisers are licensed and/or certified and be familiar with the area around the property. The most important factor in choosing an appraiser is that they provide an unbiased opinion of the property and look strictly at facts and figures.
Once your lender orders the appraisal, the appraiser will contact those living in the property to schedule a time for a walk through. They will then conduct a full walk through and assessment of the property and determine the value. If the appraisal determines the property is at or above the contract price, everything will continue as planned. As mentioned above, sometimes there is a hiccup in the process due to the appraisal value. If the price comes in below the contract price, you might experience a delay in the transaction. Either way, your lender will be a great asset, communicating with you along the way, so you can feel confident going into closing.
What do home appraisers look for?
When determining the value of the property there are a few key items on an appraiser’s checklist. First, they assess the neighborhood characteristics and market trends/ sale prices for similar properties in the area. Then they do an assessment of the home itself. Starting with the lot size and square footages, all aspects of the property are evaluated. Appraisers are looking for homes in great condition, they’re checking out appliances, age of renovations, amenities like fireplaces and patios, and any home improvements to the home. Think about anything that would be a selling point for your home and they’re likely taking note.
Knowing what to expect when going into a home buying or refinancing journey can be your key to success. Our team at MHS Lending is here to help you every step of the way. It’s our duty to make veterans become homeowners and we are experts on helping military families through their home buying journey.