After you make an offer on a home, you are going to get a home inspection, work out repairs and credits on the deal, and then bring in a residential real estate appraisal. Their job is to let both parties know what the fair market value is of the home.
If you are buying your first home, it is important to understand how the real estate appraisal process works.
#1: Home Appraisals Are Required for Mortgages
If you are taking out a mortgage on the home, the lender will require you to get a formal home appraiser. The lender wants to know what the home's value is, as this will impact their final lending decision. The lender wants to make sure the money they are giving you is backed up by the home's value that you are asking them to help you purchase.
#2: You Will Pay Your Lender for the Appraisal
Generally, your lender will find a third-party company to conduct the appraisal. You will have to pay your appraiser for this expense. An appraisal generally costs somewhere between $325-$450 for a single-family home, although the exact price may vary slightly based on where you live. The cost is not that much, and you will be expected to pay your lender for this service.
#3: Include an Appraisal in the Contract Contingency
When you write up the offer to purchase a home, you should make sure that the appraisal is included as a written contingency clause. It is not enough to just verbally agree that an inspection and an appraisal should occur; you need to make sure that it is written in the contract.
#4: Appraiser Will Take Various Features Into Account
To determine the value of your home, the appraiser is going to take various features into account. They are going to consider the size of the property and the size of the home. They are going to examine the materials used on both the interior and exterior of the home and their conditions. They will consider what recent home improvements have been made and exterior features, such as a nice yard or a pool.
#5: Appraisal Report Will Be Shared With You
Once the appraisal is complete, the mortgage company will get a copy of the report, as are you. The mortgage company will use the appraisal to determine how much money they are going to lend you. You should review the assessment and make sure that it considers all aspects that impact the home's value. If anything is missing, you can reach out to the appraiser to adjust the report.
#6: Impact of the Appraisal Report
Finally, it is important to understand the impact of the appraisal. If the appraisal shows that the home is worth more than your offer, you will enjoy some immediate equity in the home. If the appraisal shows the home is worth less than the sale price, you will need to come up with the difference between the house's sales price and the amount your lender will provide you with, or you may have to withdraw your offer.
When you purchase a home with a mortgage lender providing you with the financing for the purchase, you will need to get the home appraised. The appraisal will show you the house's fair market value and could impact if your sale goes through or not.Share