A Guide to Home Appraisals

How Appraisers Arrive at Their Estimate and What It Means for Buyers and SellersAppraisals aren't an exact science when it comes to valuing a property. Appraisals are often used by lenders when creating a mortgage for a buyer to purchase a home. Learn more about how appraisers make their decisions and how their estimates impact the final sale and purchase of the property.

For informational purposes only. Always consult with a licensed mortgage professional before proceeding with any real estate transaction.

How Appraisals Work

An appraiser will first visit a property, and walk the full length of its grounds. They consider the condition of the structure of the home and the surrounding grounds, but they'll also study the market value of homes in the area.

Appraisers are usually commissioned by lenders, but they usually work independently. By eliminating the incentives of the appraiser, they're more likely to give an honest evaluation of the home rather than be influenced by their employer.

In all 50 states, appraisers must have a current license and certification to give their professional opinion. New federal guidelines were put in place for appraisers after the Great Recession, and all are required to follow them. These guidelines are there to prevent inflation of homes, but they also make it harder for a seller to challenge the value of the home if they're not satisfied with it.

Appraisals and Lenders

Appraisals affect how much money a lender will offer their customers. Buyers who want to pay more than the appraisal cost will likely have to pay the extra out-of-pocket. In other words, a lender doesn't want to lend out $200,000 for a home that's been appraised at $175,000.

Buyers may want to bid more for a home for any number of reasons. They may love the location so much that they're willing to pay a premium, or they may have sentimental value attached to the home. However, they should know that their lender is unlikely to support paying more than is necessary.

How Appraisers Evaluate

Appraisers are looking at a variety of factors before they arrive at their answer:

  • Amenities
  • Square footage
  • Number of bedrooms/bathrooms
  • Quality of appliances
  • Floorplan
  • State of the grounds
  • Condition of wiring, plumbing, etc. (especially outdated electrical wiring)
  • Public tax records
  • Land records
  • Market sales data
  • Surrounding homes and neighborhood

Appraisers aren't as interested in the charming breakfast nook in the kitchen or the big picture window by the fireplace. They're more concerned with how open the floorplan is, how old the pipes are, and how safe the wiring is. If the home needs any major repairs or renovations, this will affect their final number.

The Cost of Home Appraisals

Home appraisals are typically the responsibility of the buyer, though sellers will sometimes pay for this charge as a buyer's perk. Appraisals can cost between $250 – $750, depending on the size of the home and the professional in question.

Home Appraisal Reports

Home appraisal reports will include information about the property, but it will also tell the reader more about the general neighborhood. If the street is well tended and filled with lovely neighbors, then the home may be valued at a far higher price than its amenities would suggest. Appraisers may include sketches of the home (including street-view and backside of property), as well as sketches of nearby properties.

Are Appraisals Required?

Technically, the answer to this question is no. Sellers are allowed to sell their home without getting an official appraisal. However, lenders usually require an appraisal, so the buyer would need to pay in cash in order not to have an appraisal. Home appraisals and home inspections are two of the most common contingencies in home buying because they prevent buyers from inheriting a dangerous property.

Sellers who fear a low appraisal have the option of making the necessary repairs that will put the home back in top condition. If sellers are in a rapidly exploding area, their home may be able to beat the odds. However, it's generally recommended for sellers to spruce up the home to attract better buyers.

Challenging an Appraisal

Piperton home sellers are usually allowed to challenge an appraisal, even though it's difficult to do. Sellers will need a good reason though if they want to challenge. For example, if the home is located in an area with several foreclosures on the block, the seller could argue that their property is worth more because it's been regularly maintained

Home appraisals can seem complicated at first but once buyers and sellers know the basics, they're easier to navigate. This guide can help everyone involved in the purchase understand how appraisals work and what they can do to influence the outcome of the value.

For informational purposes only. Always consult with a licensed mortgage professional before proceeding with any real estate transaction.

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