If you’re getting a loan soon, you should know about the importance of home appraisals. They can make or break the entire process. Here’s everything you need to know about home appraisals when you’re getting a loan.
What is a Home Appraisal?
A home appraisal is an unbiased estimate of the fair market value of a home. Appraisers determine this number by comparing your home to similar homes that have recently sold in your area.
Why Do Lenders Require a Home Appraisal?
All lenders require a home appraisal because they’re an objective way to make sure that market value is equal to or more than your negotiated purchase price. In most cases, an appraisal protects you from paying more than a home is worth.
What’s in an Appraisal?
Your home appraisal includes property details and sales information for recently sold homes that are similar to yours. It also includes notes about the current condition of the property and how the neighborhood impacts the property’s value.
Who Does the Appraisal?
Appraisals are done by licensed appraisers who are highly trained and educated to determine the value of your home. They’ve gone through rigorous coursework, testing, and on-the-job training.
They must substantiate every single finding in the report. Appraisers are heavily regulated at both the state and federal level, and they work hard to stay impartial and keep personal judgements about a home’s value at bay.
What Helps Your Home Appraise Higher?
You may wonder if a home appraises for less if it’s messy or has dated furniture. Appraisers really only look at the condition of what’s a permanent part of the house (if you can’t move it, it counts). So things like age, square footage, number of beds and baths, garage capacity, and decks and patios—those things do affect value. The quality of your home’s finishes affects its value, as well.
If you’re selling and want your appraisal to pass, fix things like water-stained walls, dirty carpet, leaky faucets, broken windows, exposed and untreated wood, cracked ceilings, and foundation issues. Things in your house should be in good working order.
Don’t forget to jot down repairs and improvements you’ve made, especially ones the appraiser might not notice. Remodeling and additions can boost your home’s value.
What If You’re Not Happy with the Appraisal?
When we receive an appraisal where the value of the home is in question, we can ask the purchase agent to submit comparable sales that they think warrant a higher value on the home (the process is similar for refinances). We send these comps on to the appraisal management company and ask for the appraiser to review them and reconsider the value of the home. The ultimate decision rests with the appraiser, however.
If the appraiser decides not to change the value of the home, there are some other options.
What if My Home Doesn’t Appraise for What I Thought It Would?
If your home doesn’t appraise for what you thought it would, you have a few options.
- Renegotiate the deal
- Pay the difference between the appraised value and either the original agreed upon price or a new price
- Back out of the contract (if your purchase contract allows for an appraisal contingency)
If the home you’re buying appraises for more than you’re purchasing it for, congratulations! You have instant equity in your new home.
Do I Still Need an Inspection?
Although an appraisal does consider condition, it isn’t the same thing has a home inspection, and it doesn’t serve the same purpose. An appraiser observes and describes the house as it is, compares it to similar homes, and comes up with a value. An inspector makes sure that the home’s systems are working and there are no structural issues. Because of these differences, we highly recommend you have a home inspection performed by a licensed home inspector.
How Long Does an Appraisal Take?
As of the writing of this article, it takes about 10 days to get an appraisal completed in the Portland area. In outlying areas, it is taking longer than that. We’ll work with you to get the appraisal completed so you can close as soon as possible. If you have any questions about the appraisal, please ask!