In the world of real estate, where every square foot and unique feature can impact a property’s value, the home appraisal can feel like both an art and a science. Whether you’re a seasoned homeowner looking to refinance or a first-time buyer navigating the complexities of the market, read below to understand the home appraisal process.
What is a home appraisal?
A home appraisal is an assessment conducted by a licensed appraiser to determine to fair market value of a property. This valuation is based on various factors such as the property's size, condition, location, and comparable sales in the area. Lenders often require a home appraisal to ensure the property's value justifies the loan amount.
The Appraisal Process
Scheduling the Appraisal
- Typically, the lender will order the appraisal once a purchase agreement is in place. The appraiser, who is an unbiased third party, will then contact the home owner to schedule a visit to the property.
Property Inspection
- During the appraisal, the appraiser will conduct a thorough inspection of the property. This includes evaluating the overall condition, size, layout, and any unique features that may affect the homes value.
Comparative Market Analysis (CMA)
- The appraiser will analyze recent sales data of similar properties in the neighborhood. This helps in determining the property's fair market value by comparing it to similar homes that have recently sold. Typically they will compare to properties that have sold within the last 6 months and within .5 miles but if sales have been low in recent months they may expand the criteria to find comparable homes.
Adjustments
- The appraiser may make adjustments to the propertys value based on specific features such as additional bathrooms, a larger lot, or recent renovations. These adjustments ensure a fair and accurate appraisal of the propertys market value.
Final Appraisal Report
- After completing the assessment, the appraiser will generate a comprehensive report detailing the property's value, the methodology used, and any adjustments made. The report is submitted to the lender and shared with the buyer and seller.
Appraisal Gaps
If the home does not appraise to the price the buyer has offered the purchase agreement is not automatically cancelled. There are two options, one re-negotiate the purchase price or two pay for the appraisal gap amount in cash.
Cost of an Appraisal
The cost of an appraisal is covered in the buyers closing costs, typically appraisals are around $500.
Understanding the home appraisal process gives homeowners and buyers the power to make smart choices. Whether it’s checking property details, comparing sales, or keeping an eye on market trends, appraisals play a big role in the real estate game. Appraisals can be helpful guides, not just obstacles.
Questions? I'm always here to help.
xx,
Claire
