10 Things to Know About a Home Appraisal
An appraiser may play one of the most important roles in the sale or purchase of a property. While a home inspector will look for issues in a home that a buyer should be aware of, an appraiser determines the dollar value of the home by looking at similar home values in the area as well as the condition of the property. Here are ten important things to know about an appraisal.
Appraisals are a Lender’s Insurance Policy
Home appraisals help mortgage lenders confirm that a home is worth its asking price. If a buyer is unable to make the payments on their mortgage, the lender’s only recourse is to foreclose on the home and try to sell it. If the home is unable to be sold for as much as the loan, the lender won’t receive their money back, putting mortgage lenders at a huge risk.
Normally, a buyer will pay for a home appraisal while a bank or mortgage lender generally has a list of appraisers who they trust. The sale can move forward if the appraisal is equal or higher to the asking price.
2. Appraisals Don’t Take Very Long
Appraisers can be on a tight schedule and may only have 20 minutes in the home while the rest of the work happens off-site. During the appraisal, the property is physically examined to confirm it’s size, the number of bedrooms and bathrooms, square footage of the living area, and any defects of upgrades to the house. Experienced appraisers are able to work quickly with a checklist as they will know exactly what to look for.
It’s a good idea for the seller’s real estate agent to be there during the appraisal. They may be able to point out renovations or upgrades that may increase the value of the home.
3. Distressed Sales Can Hurt You
The value of a home is largely determined by the sales price of similar homes in the area and the value of your property can ride on how well your neighbours take care of their property. If there have been any distressed sales such as foreclosures or short sales, it can significantly lower the property value of comparable homes in the neighbourhood. The good news is that appraisers can try to exclude the effects of distressed sales if they can find accurate comparables nearby.
4. Clean Matters
An appraiser may be influenced by their opinion of a home. It’s important to get rid of the dog hairs, dust bunnies, and move the piles of clothes out of the way. Appraisers will appreciate it when they can move easily throughout the house without having to step over any obstacles.
5. Comparables are Crucial
An appraiser needs to have an up-to-date understanding of the local real estate market in order to determine the home’s fair market value. One of the main points of an appraisal is to compare it to other homes in the area that were recently sold. The appraisal report will include a section for “comparable sales.” The appraiser will find recently sold homes in the neighbourhood that are the closest match to the property in terms of its geographic location, size, age and condition.
6. Make Repairs Ahead of Time
Damages in the home such as cracked windowpanes, scratched-up back doors, or any other small damages that you may have been meaning to fix should be taken care of before an appraisal. Damages will affect your appraisal in a negative way.
7. Sellers Can Ask for an Appraisal
If you are unsure at what price your home should be listed and you have received multiple suggestions from different real estate agents for an initial asking price, it can be perfectly reasonable to hire an independent appraiser to determine the most accurate market value of the home and set the price accordingly.
8. You Won’t See a Copy of the Appraisal Report
Only the lender is able to receive a copy of the appraisal report. It doesn’t matter who pays for the appraisal. In a mortgage finance context, it only matters who the “client” is.
9. Communication is welcome
Appraisers will welcome any information that can help them determine the accurate market value of a property. A seller’s agent can provide additional comparables, receipts for upgrades or renovations, and proof of continual upkeep.
10. You Can Protest the Appraisal
If you think the appraisal is lower than it should be, you can protest it. You’ll need to gather documentation to support your argument and contact your lender and find out what their procedure is for disputes.