When you’re applying for a loan to buy or refinance your house, your lender will need a home appraisal. Real estate appraisers can look into many details before they decide on a property’s value. They will generally do market research, look at comparable sales, and inspect the home.
Defining a Home Appraisal
A home appraisal is an unbiased opinion of a property’s value by licensed or certified professionals. In a home-buying scenario, an appraisal is necessary to determine whether the home’s contract price is correct for the house’s condition, features, and location. In a refinance transaction, the appraisal ensures that the lender isn’t handing the borrower more money than the value of the house. Your lender will usually hire an appraiser to do a home appraisal and get an accurate estimate of the risk of giving the loan. Because the property will serve as collateral in case the borrower defaults on the payments, the lender will make sure that the loan amount isn’t greater than the property’s value.
Home Inspection versus Home Appraisal
Inspections and appraisals both are essential in the home-buying process, but they serve different purposes.
A home inspection is for evaluating a property’s condition. The house inspector checks the structure, including the walls, floors, ceilings, doors, and windows. The inspector also checks the mechanical and electrical systems, appliances, and plumbing. After the examination, the inspector provides a complete report on the home’s condition that may or may not include repair recommendations.
On the other hand, an appraisal is an assessment of a property’s value in the property’s current condition. The appraiser does not make any recommendations for repairs.
A home appraisal will typically cost around $300-$400. Fees may vary depending on your loan amount, FHA fees, property size, and property location. VA loan programs have a set schedule of fees. Even though the lender requests the appraisal, you will have to bear the cost of the appraisal; appraisal fees are typically included in the mortgage’s closing costs.
Walking Through the Appraisal Process
If you are buying a home, the lender will order the appraisal once you’ve made an offer and signed the contract. If you are refinancing, the lender will request an appraisal once you submit your application.
As mentioned before, a real estate appraiser will consider many details when valuing a property. Below are some of the factors they will take into account:
- Comparable sales in the area
- Local housing market trends
- Home and Lot size
- Age, design, and type of home
- Renovations and home improvements
- Appliances and amenities
- Types of materials used, both interior and exterior
As a borrower, you have the right to ask for a copy of this report at least three days before the loan closed. It is advisable to go through the appraisal report to check if everything is correct. If you find any errors, let the lender know. Incorrect information you may find could lead the appraiser to re-evaluate the property. You can also request a second appraisal from the lender granted that you are willing to pay for it.
What Homeowners Need to Know
If everything goes smoothly, the home appraisal is just another box to tick on the closing checklist. However, if the appraisal value is lower than expected, the mortgage transaction can be delayed or, in some instances, canceled. To potentially save yourself a lot of trouble, it is a good idea to do research work on the home’s value before purchasing or refinancing.
If you’re ready to buy your dream home or want to refinance your home at a better rate, call our expert loan officers at (888) 387-4808 or visit our website www.lendova.com for further information.